AS Citadele banka
The Group at a glance
AS Citadele banka Annual report for the year ended 31 December 2021 2
Key figures and events of the Group
Strong financial performance with net profit
reaching EUR 55.0 million in 2021 and
14.8% return on equity. Net profit in Q4
2021 was EUR 10.3 million.
The number of active customers continued
to grow and reached an all-time high of 361
thousand clients as of 31 December 2021,
11% growth y-o-y.
In 2021 EUR 1.1 billion in new financing
was issued to private, SME, corporate and
leasing customers, 2.3 times higher than
2020. New financing in Q4 reached EUR
293 million, 9% growth q-o-q.
Baltic deposits continued to increase by
EUR 363 million in 2021, or 11% growth vs.
year-end 2020.
The Bank continues to operate on the back
of prudent capital and liquidity ratios.
Group’s CAR (including period’s result) was
18.8% and LCR of 207% as of 31
December 2021.
Citadele has completed the issuance of
EUR 200 million of senior unsecured
preferred bonds in November 2021, rated
Baa3 by Moody’s. The purpose of the
issuance is to meet Minimum Requirement
for own funds and Eligible Liabilities
(MREL).
EUR 40 million bonds were issued under
the Fourth Unsecured Subordinated Bonds
Programme and listed on the Baltic Bond
List of Nasdaq Riga in December 2021.
Citadele Banka’s credit rating upgraded to
Baa2 with stable outlook by Moody’s.
Citadele has entered into a binding
agreement with Trusted Novus Bank
Limited regarding the sale of its Swiss
subsidiary - Kaleido Privatbank AG. The
closing of the acquisition is expected by
year end 2022, subject to regulatory
approvals.
EUR millions
2021
2020
2019
Net interest income
Net fee and commission income
Net financial and other income
Operating income
Operating expense
Net credit losses and impairments
Net profit
Return on average assets (ROA)
Return on average equity (ROE)
Cost to income ratio (CIR)
Cost of risk ratio (COR)
108.1
67.5
84.6
36.5
30.2
30.9
9.2
(3.1)
8.4
153.7
94.7
123.9
(95.0)
(80.0)
(82.8)
(1.8)
(10.5)
(3.7)
55.0
3.6
36.5
1.14%
0.09%
1.07%
14.8%
1.05%
11.5%
61.8%
84.5%
66.8%
0.1%
0.6%
0.2%
Adjusted for one-time items
*
:
Operating income
153.7
106.0
123.9
Net profit
55.0
14.9
36.5
Return on average assets (ROA)
1.14%
0.36%
1.07%
Return on average equity (ROE)
14.8%
4.4%
11.5%
Cost to income ratio (CIR)
61.8%
75.5%
66.8%
EUR millions
31 Dec
2021
31 Dec
2020
31 Dec
2019
Total assets
5,055
4,597
3,743
Loans to public
2,702
1,541
1,568
Deposits from customers
3,814
3,671
3,290
Shareholders’ equity
397
344
341
Loan-to-deposit ratio
71%
42%
48%
Total capital adequacy ratio
(CAR), transitional (including
period’s result)
18.8%
26.0%
22.2%
Common equity Tier 1 (CET1)
capital ratio, transitional (including
period’s result)
16.3%
22.1%
18.8%
Full time employees
1,335
1,230
1,369
* 2020 is adjusted for one-time losses related to the tail risk defensive
measures in the amount of EUR (28.8) million, included in “Net
financial and other income” and one-time gain of EUR 17.5 million
from leaseback sale of headquarters building in Latvia and sale of
building in Lithuania.
AS Citadele banka
Contents
AS Citadele banka Annual report for the year ended 31 December 2021 3
CONTENTS
Management report
4
Letter from the Management
10
Corporate governance
15
Statement of Management’s Responsibility
Financial statements
16
Statement of income
17
Statement of comprehensive income
18
Balance sheet
19
Statement of changes in equity
20
Statement of Cash Flows
21
Notes to the financial statements
76
Auditors’ Report
Other
86
Other regulatory disclosures
89
Quarterly statements of income and balance sheets of the Group
90
Definitions and abbreviations
Rounding and Percentages
Some numerical figures included in these financial statements have been subject to rounding adjustments. Accordingly,
numerical figures shown for the same category presented in different tables may vary slightly, and numerical figures
shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.
In these financial statements, certain percentage figures have been included for convenience purposes in comparing
changes in financial and other data over time. However, certain percentages may not sum to 100% due to rounding.
AS Citadele banka
Management report | Financial review of the Group
AS Citadele banka Annual report for the year ended 31 December 2021 4
The geo-political situation today has dramatically
changed since we ended 2021 and today our
thoughts are with the citizens of Ukraine. In the
Baltic's we feel an emotional impact and we are
closely following the developments and are taking
action to the best of our abilities to care for our
employees and our customers. Our 2021 results are
important, and we are proud to deliver on many
dimensions but in the light of the recent events we
are humble.
Johan Åkerblom
CEO and Chairman of the Management Board
.
Russia's invasion into Ukraine
significantly changes world’s
political and economic
situation
Economic recovery in the Baltics in
2021 has been faster than
anticipated and less than two years
after beginning start of the Covid-19
pandemic, GDP in the Baltic
countries has already exceeded pre-
pandemic levels. Growth in the
global economy also remains strong,
but inflation in the Baltics has risen
sharply in 2021 and is the highest in
the EU. Rising prices will impact
consumption, but situation in labour
market is good, wages continue to
increase, and unemployment is
declining. Inflation is notable
challenge in the global economy,
Covid-19 pandemic is not yet over,
and high energy costs are risk to
economic growth in the Baltic region.
Russia's invasion into Ukraine has
significantly changed the political and
economic situation in the world, and
it will certainly affect the economies
of the Baltic States. Sanctions and
trade restrictions against Russia, as
well as Belarus, will affect Baltic
exporters, while higher energy prices
will reduce the purchasing power of
the households. Consumer and
investor sentiment could also
become more cautious, while rising
prices for metals, food and other
natural resources is also a risk to the
global economy. However, exact
impact of the Russian invasion of
Ukraine on the Baltic economies is
currently difficult to assess, as the
situation is changing and will depend
on the further development of the
conflict.
Innovations and development
On the back of the digital strategy of
Citadele, the Covid-19 situation
pushed us to accelerate digital
solutions to secure our clients access
to remote financial services. We
managed to launch digital on-
boarding for SMEs in Latvia, Citadele
Business Portal, convenient and
easy to use e-commers solutions,
incl. Klix Pay later, Citadele Phone
POS, Citadele Robo-Assistant,
broad Mobile App functionality and
wide range of contactless payments,
incl. Google Pay, Fitbit Pay and
Garmin Pay. All these solutions were
welcomed by our customers and
helped them to get more proficient
financial services remotely and to
adjust their businesses to the new
environment.
Bank with one of the best
customer service in the
Baltics
Our commitment of providing the
best customer service enabled
Citadele to maintain the top position
among banks in the Baltics,
according to the annual mystery
shopper survey conducted by
international customer service
evaluation company DIVE. Citadele
was announced as the bank with the
best customer service in Latvia for
the seventh time and having the third
best result in Lithuania and Estonia.
Growing client base
We are proud for steadily growing
number of active customers –
reaching 361 thousand clients as of
31 December 2021, 11% growth year
over year. The number of active
Mobile App users reached 207
thousand, a 41% increase y-o-y.
EUR 1.1 billion issued in new
financing to Baltic private,
SME, corporate and leasing
customers
We have continued to support the
business community with financing
for growth and expansion.
New financing to our customers
reached a record high of EUR 1.1
billion in 12 months 2021, 2.3 times
higher than in 2020. EUR 293 million
were issued in Q4 2021, 9% growth
q-o-q.
As part of our business focus, we
have been supporting a number of
larger deals such as EUR 21 million
to Domina Shopping and EUR 11
million to VMG Group, and serving
local transactions, for example in
Latvia – Ape Motors, Eften Domina,
Daugavpils Autobusu parks,
Samariešu biedrība, Pharmidea,
Agrocredit, Mārupes siltumnīcas and
in Lithuania – Viciunai Group, VPH,
Elmoris, Modus Asset Management,
and Estonia – Lumi Retail Property..
Sharing the view that climate change
is becoming a key priority for a wide
range of industries, including
financial institutions, the Bank has
started a solar panels consumer
lending pilot in Lithuania in 2021,
helping the society to access
sustainable assets for a more
attractive price. Citadele will continue
to develop new offers supporting the
green transition and is committed to
issue significant support to green
projects during coming years.
The total loan book as of 31
December 2021 was EUR 2,702
million, 75% higher vs. year-end
2020. Portfolio growth was impacted
by acquisition of the SIA UniCredit
Leasing (rebranded to SIA Citadele
Leasing) at the beginning of 2021.
Overall, the financial standing of our
clients is reassuring, and portfolio
quality continued to improve and the
NPL ratio stood at 3.3% as of 31
December 2021, vs. 3.5% at the end
of 2020.
Strong financial results
Strong financial performance with net
profit reaching EUR 55.0 million in
2021, which translated into 14.8%
AS Citadele banka
Management report | Letter from the Management
AS Citadele banka Annual report for the year ended 31 December 2021 5
return on equity. Net profit in Q4 was
EUR 10.3 million.
Citadele continues to operate with
adequate capital and liquidity ratios:
CAR (including period’s result) of
18.8% and LCR of 207% as of 31
December 2021.
Customer deposits reached EUR
3,814 million as of 31 December
2021, increase of 4% compared to
the end of 2020.
Loan-to-deposit ratio was 71% as of
31 December 2021, compared to
42% as of year-end 2020.
Citadele’s credit rating
upgraded to Baa2 by Moody’s
In September 2021, the international
credit rating agency Moody’s
upgraded Citadele’s credit rating to
Baa2 with stable outlook. Upon
upgrade of the credit rating, Moody's
has taken into consideration the
continued improvement in Citadele’s
solvency position, with the bank
significantly reducing the proportion
of non-performing loans, supported
by strengthened capital generation,
following the acquisition of SIA
UniCredit Leasing (rebranded to SIA
Citadele Leasing), and an
improvement in the bank’s operating
environment.
Citadele raises funds in the
international and local
financial markets
At the end of November 2021
Citadele completed issuance of EUR
200 million of senior unsecured
preferred bonds, rated Baa3 by
Moody’s. The purpose of the
issuance is to meet Minimum
Requirement for own funds and
Eligible Liabilities (MREL).
In December Citadele completed an
oversubscribed issuance of EUR 40
million bonds under the Fourth
Unsecured Subordinated Bonds
Programme. The bonds were issued
with 10Y maturity, with issuer’s
optional redemption date after five
years and with fixed interest rate of
5% per annum. The bonds are listed
on the Baltic Bond List of Nasdaq
Riga.
These deals are a testimony of our
improved business quality which
facilitates placement capabilities
both in and outside the Baltic market.
European Central Bank direct
supervision
The European Central Bank
announced it has classified Citadele
as a significant credit institution,
commencing its direct supervision as
of 1 January 2021. The Financial and
Capital Market Commission
continues to participate in the
supervision of the Bank and
cooperate with the ECB within Joint
Supervision Team. The Asset Quality
Review is scheduled to take place in
the period from May 2022 to January
2023.
Post reporting period events
Citadele has agreed to sell its
Swiss subsidiary
AS Citadele banka has entered into a
binding agreement with Trusted
Novus Bank Limited regarding the
sale of its Swiss subsidiary - Kaleido
Privatbank AG. Trusted Novus Bank
Limited will acquire 100% of Kaleido
Privatbank AG. The closing of the
acquisition is expected by year end
2022, subject to regulatory
approvals. The sale of Kaleido is a
further step focusing on Citadele’s
core activities in the Baltics to
support the local economies.
Recent events in Ukraine and
Russian sanctions
Management is closely monitoring
fast-changing and uncertain situation
in Ukraine. A crisis group has been
set up within Citadele. All new laws,
policies and sanctions, including
sanctions imposed on Russia, are
diligently implemented. Consistently
with long standing Citadele’s
objective to become the leading
financial services provider in the
Baltics, internal risk exposure limits
with Russia, other CIS countries and
Ukraine are limited. Therefore, as of
signing these financial statements,
the Bank and the Group has not
experienced any material impact
from the recent events in Ukraine or
from Russian sanctions. The indirect
impact from these events is
monitored, as Citadele’s clients and
global markets adjust to the new
economic realities.
AS Citadele banka
Management report | Financial review of the Group
AS Citadele banka Annual report for the year ended 31 December 2021 6
Financial review of the Group
Results and profitability in 2021
Net interest income reached EUR 108.1 million in 2021, a
60% increase as compared to the respective period last year,
primarily driven by higher interest income from SIA Citadele
Leasing book and lower interest expenses resulting from
optimised cash balances. Net interest income in Q4 2021
reached EUR 27.2 million, a 2% decrease q-o-q.
The Group’s net fee and commission income in 2021
reached EUR 36.5 million, which translates into a 21%
increase vs. year 2020, mainly due to recovered customer
confidence and interest in savings products. Net fee and
commission income in Q4 2021 was EUR 9.6 million (-3% q-
o-q).
Operating income in 2021 reached EUR 153.7 million, of
which EUR 37.0 million relates to the fourth quarter (-7% q-o-
q).
Operating expenses in 2021 increased to EUR 95.0 million,
or 19% increase compared to 2020 reflecting the SIA
UniCredit Leasing acquisition. Staff costs increased by 20% to
EUR 61.1 million. The number of full-time employees was
1,335 vs. 1,230 as of 31 December 2020. Other costs were
EUR 25.2 million (19% increase y-o-y). Depreciation and
amortization expenses stood at EUR 8.8 million.
Citadele’s cost to income ratio in 12 months 2021 improved
to 61.8% versus 75.5% in 2020.
The overall credit quality of the loan book continued to
improve, with no major individual impairments during the
period with net credit losses of EUR (1.8) million in 12
months 2021.
Stage 3 loans to public, gross ratio has decreased to 3.3%
as of 31 December 2021, compared to 3.5% at the end of
2020, benefiting from improvement of asset quality within the
leasing portfolio, allocation of gains arising from asset
purchase accounting and recoveries from several legacy
cases.
The Group’s securities portfolio had stable performance over
2021. The main factor driving returns of the portfolio remained
the low yield environment in EUR currency that limits the
overall profitability of securities investments. While rising
yields in major currencies have had negative impact on the
portfolio revaluation in 2021, majority of impact was mitigated
by the low average duration of the portfolio and amortized cost
treatment being applied to 86% of bond holdings.
Net interest income, EURm
Net fee and commission
income, EURm
Net Financial & other income, EURm
Operating income, EURm
*adjusted for one-time losses related to the tail risk
defensive measures in the amount of EUR (28.6) million
and one-time gain of EUR 17.5 million from leaseback
sale of headquarters buildings in Latvia and Lithuania.
Operating expense, EURm
14.9
15.9
15.0
15.3
50.9
61.1
5.2
5.6
6.0
8.4
21.1
25.2
8.0
8.8
Q1`21 Q2`21 Q3`21 Q4`21 2020 2021
Depreciation and amortisation
Other operating expenses
Staff costs
26.1
27.2
27.6
27.2
67.5
108.1
0
20
40
60
80
100
Q1`21 Q2`21 Q3`21 Q4`21 2020* 2021
8.2 8.8
9.9
9.6
30.2
36.5
Q1`21 Q2`21 Q3`21 Q4`21 2020* 2021
36.7 40.1 39.9 37.0
106.0
153.7
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
Q1`21 Q2`21 Q3`21 Q4`21 2020* 2021
2.5
4.2
2.3
0.2
8.2
9.2
Q1`21 Q2`21 Q3`21 Q4`21 2020* 2021
AS Citadele banka
Management report | Financial review of the Group
AS Citadele banka Annual report for the year ended 31 December 2021 7
Balance sheet overview
The Group’s assets stood at EUR 5,055 million as of 31
December 2021 representing a 10% increase from year end
2020 (EUR 4,597 million).
The net loan portfolio was EUR 2,702 million as of 31
December 2021, increasing by EUR 1,160 million (75%) from
year end 2020, mainly impacted by SIA UniCredit Leasing
portfolio acquired at the beginning of year.
Strong growth also seen in new financing in 2021 reaching
EUR 1.1 billion million, 2.3 times higher than in the same
period in 2020. EUR 312 million were issued to retail
customers, EUR 382 million to corporate customers and EUR
421 million to SIA Citadele Leasing clients. New financing in
Q4 reached EUR 293 million, 9% growth q-o-q.
In terms of loan portfolio’s geographical profile, Latvia
accounted for 48% of the portfolio, with EUR 1,299 million (vs.
57% as of year-end 2020), followed by Lithuania at 37% with
EUR 1,001 million (vs. 32% as of year-end 2020) and Estonia
at 14% with EUR 380 million (vs. 10% as of year-end 2020).
EUR 21 million (1% of the portfolio) was issued to other EU
and other countries.
Loans to Households represented 45% of the portfolio (vs.
46% as of year-end 2020). Mortgages have increased by 45%
since year end 2020, mainly due to ABLV portfolio acquisition.
Consumer lending has increased by 6%. Card lending has
slightly decreased by 4% since year end 2020 impacted by
increased savings by customers. Finance leases have
increased seven times after the UniCredit Leasing loan book
acquisition. Overall, the main industry concentrations were
Real estate purchase and management (17% of gross loans),
Transport and Communications (14%), Manufacturing (15%)
and Trade (13%).
The Bank optimised cash balances post UniCredit Leasing
transaction that allowed it to minimize amount of negative
interest charged by the Central Bank and to keep the
securities portfolio at a relatively stable level throughout the
year. Portfolio size increased by 2% over 2021 that reflects
the overall balance sheet growth.
The main source of funding, customer deposits, grew by 4%
v.s. year-end 2020. Baltic domestic customer deposits
increased by EUR 363 million (+11%). As of 31 December
2021, total Group customer deposits were EUR 3,814 million.
Loans, EURm
Deposits, EURm
Balance sheet structure, EURm
Ratings
International credit rating agency Moody's
Investors Service has assigned Baa2 rating with
stable outlook (13 September 2021).
The main credit strengths are:
▪ Sound funding and liquidity, underpinned
by a deposit-based funding model with
lower reliance on non-resident funding
▪ Strong capitalization and improving asset
quality
Moody’s
Long term deposit
Baa2
Counterparty risk rating
Baa1/P-2
Short term deposit
P-2
Baseline Credit Assessment
ba1
Adjusted Baseline Credit Assessment
ba1
Outlook:
Stable
Detailed information about ratings can be found on the web
page of the rating agency www.moodys.com
1 396
1 568
1 541
2 702
YE`18 YE `19 YE`20 YE`21
2 645
3 290
3 671
3 814
YE`18 YE `19 YE`20 YE`21
AS Citadele banka
Management report | Segment highlights
AS Citadele banka Annual report for the year ended 31 December 2021 8
Segment highlights
Retail segment
Private individuals and SMEs showed flexibility during
Covid-19 lockdown and activity rapidly recovered as soon as
measures were relieved, despite Covid-19 second wave and
following lockdown measures. Increased activity was
observed in most of the customer segments and products
throughout the second half of the year, strengthened by
launch of digital onboarding for SMEs, Merchant portal,
Phone POS, onboarding of ABLV mortgage customers,
insurance solution offer launch for Lithuania mortgage
customers and several modern payment solutions in Baltics:
Garmin Pay, Fitbit Pay, Google Pay.
To capture maximum benefit for the customers from Bank's
innovative solutions and providing capital management
services, private affluent segment has been integrated in
Retail sector, keeping strong focus on Baltic customers. To
fulfil customers’ needs in growing deposits environment,
Team for Retail customers have been established to consult
on Savings, Investments & Insurance areas.
The number of active Retail customers reached a new all-
time high level for Citadele, and primary customers
continued to grow reaching 179 thousand clients as of 31
December 2021, a 21% increase y-o-y.
Citadele once again has been named as the bank with one
of the best customer service in the Baltics. The Bank was
ranked in the first position in Latvia for the seventh time, and
the third best in Lithuania and Estonia in Dive’s 2021 annual
customer service evaluation survey.
New lending to Retail customers reached EUR 312 million
in 2021, of which EUR 90 million were issued in Q4 2021, a
24% growth q-o-q. Private individuals were major
contributors in Retail segment, with an issued amount of
EUR 64 million in Q4 2021 and EUR 215 million YTD. Total
loans to private individuals and SME customers reached
EUR 1,097 million, a 21% increase since year end 2020 with
good loan quality.
Deposits from private individuals and SMEs reached EUR
2,095 million, an 18% increase since year end 2020.
Corporate segment
Corporate lending in 2021 was at a record high level - EUR
382 million disbursed to corporate banking clients and EUR
421 million issued to leasing clients. EUR 43 million invested
in domestic market corporate bonds. Most active clients
were in the real estate business, trade, manufacture and
transportation. The total corporate loan portfolio grew by
16% compared to year end 2020. Credit portfolio quality
stayed stable.
The deposit portfolio grew 16% vs. year-end 2020 and
reached EUR 963 million as of 31 December 2021.
Loans, EURm
Deposits, EURm
New lending, EURm
Operating income, EURm
0
200
400
600
800
1000
Private
individuals
SME Corporate SIA
Citadele
Leasing
YE`20 YE`21
0
400
800
1200
1600
Private
individuals
SME Corporate
YE`20 YE`21
0
100
200
300
400
Private
individuals
SME Corporate Leasing
2020 2021
0
10
20
30
40
50
Private
individuals
SME Corporates Leasing
2020 2021
AS Citadele banka
Management report | Business environment
AS Citadele banka Annual report for the year ended 31 December 2021 9
Business Environment
Growth in the global economy remains strong
Business sentiment in the world's leading economies is strong,
world trade and new industrial orders are growing, and
unemployment in the US and Europe is approaching pre-crisis
levels. However, inflation has picked up faster than anticipated
and the risks to the global economy have increased. Inflation,
energy crisis in Europe, growth slowdown in China, geopolitical
tensions and the rapid spread of the Covid-19 omicron version,
are all significant risks for global economy and the Baltics.
These risks are also increasingly reflected in the lower
economic growth forecasts. For example, the International
Monetary Fund has cut its global economic growth forecast for
2022 from 4.9% to 4.4%.
Baltic region in 2021 grew faster than expected
Less than two years after the start of the pandemic, all three
Baltic States have exceeded previous GDP levels. According
to preliminary data in 2021 GDP grew by 4.7% in Latvia and by
5.1% in Lithuanian while in Estonia in the first three quarters of
2021 GDP increased by 8.3%. In fact, economic growth of the
Baltic States in 2021 will be even faster than forecasted in
September 2020, before the second and third waves of the
pandemic, although economic recovery remains uneven.
Global demand for goods remains strong, IT, professional and
business services continue to grow, and EU's economic
recovery funds will start to flow into construction in 2022, and
there is considerable potential for recovery in various service
sectors, which are still affected by Covid-19 restrictions. These
factors should continue to support economic growth in 2022.
Inflation in the Baltics at the highest level since 2008
Inflation in the Baltics has risen sharply in 2021 and is now the
highest in the European Union. In Lithuania and Estonia, the
rise in consumer prices has exceeded 10%, while in Latvia
inflation reached 7.9% in December 2021. More than half of
inflation in the Baltics is caused by rising fuel, electricity,
natural gas and heat prices.
In recent month inflation has become broader and producer
price inflation in the Baltics has exceeded 20%. The rise in
energy prices has not yet been fully reflected in final consumer
prices, and entrepreneurs have to reckon with a rapidly rising
wages.
Energy crisis is a risk to economic growth
The uneven and rapid economic recovery, the strong support
measures for the economy and various political as well
weather factors since the summer of 2021 have led to a very
sharp rise in energy prices in Europe as electricity market
prices in Europe have increased 3-5 times compared to
previous years.
High energy prices are significant risks to economic growth in
2022, however so far increase in electricity prices has not had
a significant impact on manufacturing. Electricity consumption
in the Baltics continues to grow and in 2021 manufacturing in
the Baltics has grown significantly faster than the economy as
a whole.
IHS Markit Composite PMI
(Values above 50 indicate expansion)
GDP (constant prices, 2015=100)
Manufacturing (constant prices, 2015=100)
Inflation in Latvia (% year-on-year)
IHS Markit Composite PMI
(Values above 50 indicate expansion)
GDP (constant prices, 2015=100)
Inflation (% year-on-year)
Export of goods (% year-on-year)
10
30
50
70
90
2007 2009 2011 2013 2015 2017 2019 2021
US Euro area
Japan China
90
100
110
120
130
2014
2015
2016
2017
2018
2019
2020
2021
Estonia
Latvia
Lithuania
Euro area
-10%
-5%
0%
5%
10%
15%
20%
2004 2006 2008 2010 2012 2014 2016 2018 2020
Estonia
Latvia
Lithuania
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
2013 2014 2015 2016 2017 2018 2019 2020 2021
Estonia
Latvia
Lithuania
World trade
AS Citadele banka
Management report | Other regulatory information
AS Citadele banka Annual report for the year ended 31 December 2021 10
OTHER REGULATORY INFORMATION
Name
Address
LV-1010, Latvia
Web page
www.citadele.lv
www.cblgroup.com
Phone
(371) 67010 000
LEI code
2138009Y59EAR7H1UO97
Registration number
40103303559
Licence number
06.01.05.405/280
Licence issue date
30/06/2010
Branches
AS Citadele banka has 19 branches and client service
centres in Latvia, 1 branch in Estonia and 1 branch in
Lithuania as of the period end. The Lithuanian branch has
6 customer service units in Lithuania. AS Citadele banka
has 4 client consultation centres in Latvia.
Information about branches, client service centres and
ATMs of Citadele is available in the Citadele web page's
section “Branches and ATMs”.
Dividends
Refer to Note 26 (Share Capital) of the annual report. As at
issuance of the annual report the Management proposes
to transfer the Bank’s earnings for 2021 to the retained
earnings account to strengthen the capital position.
Future development
Citadele aims to become the primary bank of choice for
aspiring retail and small business customers across the
Baltics and will continue to relentlessly improve products
and services. Citadele will continue to provide high quality
financial services to clients and their businesses with an
objective to foster further growth across the whole Baltic
region. A complete portfolio of banking, leasing, financial
and wealth management services is to be offered for both
private individuals and companies. The core market of
Citadele remains unchanged: Latvia, Lithuania and
Estonia.
Risk management
The main risks to which the Group is exposed are credit
risk, market risk, interest rate risk, liquidity risk, currency
risk and operational risk. For each of these risks the Group
has approved risk management policies and other internal
regulations defining key risk management principles and
processes, functions and responsibilities of units, risk
concentration limits, as well as control and reporting
system. The Group’s risk management policies for each of
the above-mentioned risks and certain other risks are
briefly summarised in the Note 33 (Risk Management) of
these financial statements.
Domicile of entity
Country of
incorporation
Legal form
AS Citadele banka
Management report | Corporate governance
AS Citadele banka Annual report for the year ended 31 December 2021 11
CORPORATE GOVERNANCE
AS Citadele banka is the parent company of Citadele Group. AS Citadele banka is a joint stock company. Approximately
75% of shares in AS Citadele banka are owned by a consortium of international investors represented by Ripplewood
Advisors LLC. The European Bank for Reconstruction and Development (EBRD) owns approximately 25% of shares in
AS Citadele banka.
The Statement of Corporate Governance is published on the Bank’s website www.cblgroup.com.
Audit Committee’s report to the shareholders
In 2021 Audit Committee of AS Citadele banka (hereinafter – the Committee) acted in the role of audit committee as
required by the Financial Instruments Market Law.
The Committee performed tasks in line with the requirements of the law:
- Supervised the preparation of the annual report for the year ended 31 December 2021;
- Supervised the process of audit of the annual report for the year ended 31 December 2021;
- Supervised the effectiveness of internal controls, risk management and internal audit systems as applicable to
the process of the preparation of financial statements;
- Supervised the approval of the external auditor for audit of the annual report for the year ended 31 December
2021;
- Supervised the compliance of the auditor of the annual report for the year ended 31 December 2021 with
independence and objectivity requirements set forth in the Law of the Provision of Audit Services;
- Communicated to the Supervisory Board the conclusions made by the auditor of the annual report for the year
ended 31 December 2021.
In 2021 the Committee was not hindered in any way, and full access to any information required by the Committee was
ensured. The Committee throughout the year kept the Management Board and the Supervisory Board informed about
the conclusions and recommendations made by it. In the course of discharging its duties as related to the preparation of
the annual report for the year ended 31 December 2021 the Committee did not encounter any evidence that would
suggest that these financial statements would not be true and fair.
A detailed report on the activities of the Committee in 2021 has been submitted to the Supervisory Board of the Bank.
Supervisory Board of the Bank as of 31/12/2021:
Name
Current Position
Date of
first appointment
Timothy Clark Collins
Chairman of the Supervisory Board
20 April 2015
Elizabeth Critchley
Deputy Chairperson of the Supervisory Board
20 April 2015
James Laurence Balsillie
Member of the Supervisory Board
20 April 2015
Dhananjaya Dvivedi
Member of the Supervisory Board
20 April 2015
Lawrence Neal Lavine
Member of the Supervisory Board
20 April 2015
Klāvs Vasks
Member of the Supervisory Board
30 June 2010
Nicholas Dominic Haag
Member of the Supervisory Board
19 December 2016
Karina Saroukhanian
Member of the Supervisory Board
19 December 2016
Sylvia Yumi Gansser Potts
Member of the Supervisory Board
29 October 2018
There were no changes in the Supervisory Board of the Bank in the reporting period.
Timothy Collins, Chairman of the Supervisory Board. Mr. Collins is the Chief Executive Officer of Ripplewood. Mr.
Collins has led the Ripplewood team in investing around the globe, including in the U.S., Europe, the Middle East and
Asia. Mr. Collins and Ripplewood have delivered outsized returns, deploying over USD 6 billion in equity, representing
over USD 40 billion of total enterprise value, and played an instrumental role in transforming and strengthening two
prominent institutions, Commercial International Bank of Egypt and Shinsei Bank of Japan. Before founding Ripplewood
in 1995, Mr. Collins worked for Cummins Engine Company, Booz, Allen & Hamilton, Lazard Frères & Company and Onex
Corporation. Mr. Collins is involved in several not-for-profit and public sector activities, including the Trilateral
Commission, the Council on Foreign Relations, Neom Advisory Board and Yale Divinity School Advisory Board, is the
Chairman of the Advisory Board for Yale School of Management and is a member of the Investment Advisory Committee
to the New York State Common Retirement Fund. Mr. Collins has served on a number of public company boards,
including Asbury Automotive, Shinsei Bank of Japan, Advanced Auto, Rental Services Corp., Commercial International
Bank of Egypt, Gogo and Citigroup (after it accepted public funds). Mr. Collins also served as an independent director at
Weather Holdings, a large private emerging markets telecom operator. Mr. Collins currently represents Ripplewood on
the Boards of Banque Saudi Fransi (KSA), Citadele (Latvia), EFG Hermes (Egypt) and SODIC (Egypt). Mr. Collins has
a BA in Philosophy from DePauw University and a MBA in Public and Private Management from Yale University's School
of Management. Mr. Collins received an honorary Doctorate of Humane Letters from DePauw University in 2004 and has
been an Adjunct Professor and Visiting Fellow at New York University. He serves as a Visiting Lecturer at the Yale Law
School and the Senior Becton Fellow at the Yale School of Management.
AS Citadele banka
Management report | Corporate governance
AS Citadele banka Annual report for the year ended 31 December 2021 12
Elizabeth Critchley, Deputy Chairperson of the Supervisory Board. Ms. Critchley is the Managing Partner of
Ripplewood Advisors I LLP. Ms. Critchley has been leading Ripplewood's investment efforts, including most recently into
Eastern Europe and the Middle East. Ms. Critchley serves as a Director on the Boards of Citadele (Latvia), Saudi Fransi
Capital (Saudi Arabia), EFG Hermes (Egypt) and SODIC (Egypt). Before joining Ripplewood, Ms. Critchley was a
Founding Partner of Resolution Operations, which raised GBP 660 million through a listed vehicle at the end of 2008,
and went on to make three acquisitions in financial services (Friends Provident plc for USD 2.7 billion, most of Axa's UK
life businesses for USD 4 billion and Bupa for USD 0.3 billion). This consolidation strategy was financed through a
combination of debt and equity raisings, as well as structured vendor financing. Until forming Resolution Operations, Ms.
Critchley was a Managing Director at Goldman Sachs International where she ran the European FIG Financing business.
Ms. Critchley has structured, advised, or invested in transactions with more than fifty global financials and corporates.
Ms. Critchley holds a First Class Honours Degree in Mathematics from University College London.
James L. Balsillie, member of the Supervisory Board. Mr. Balsillie's career is unique in Canadian business. He is the
retired Chairman and co-CEO of Research In Motion (BlackBerry), a technology company, he scaled from an idea to
USD 20 billion in sales globally. Mr. Balsillie's private investment office includes global and domestic technology
investments such as cybersecurity leader Magnet Forensics and space technology leader MDA. He is the co-founder of
the Institute for New Economic Thinking in New York, the Council of Canadian Innovators based in Toronto, and CIO
Strategy Council, as well as founder of the Centre for International Governance Innovation in Waterloo, the Centre for
Digital Rights, the Balsillie School of International Affairs, and the Arctic Research Foundation. He currently chairs the
boards of CCI, CIGI, Innovation Asset Collective (Canada's IP Collective) and co-Chairs CIOSC. He is also a member of
the Board of the Carnegie Endowment for International Peace and the Advisory Board of the Stockholm Resilience
Centre; an Honorary Captain (Navy) of the Royal Canadian Navy and an Advisor to Canada School of Public Service.
Mr. Balsillie was the only Canadian ever appointed to US Business Council and was the private sector representative on
the UN Secretary General's High Panel for Sustainability. His awards include: several honorary degrees, Mobile World
Congress Lifetime Achievement Award, India's Priyadarshni Academy Global Award, Canadian Business Hall of Fame,
Time Magazine's World's 100 Most Influential People and three times Barron's list of "World's Top CEOs". Mr. Balsillie
holds a Bachelor of Commerce from the University of Toronto, an MBA from Harvard Business School, and is a Fellow
of the Institute of Chartered Accountants Ontario.
Dhananjaya Dvivedi, member of the Supervisory Board. Mr. Dhananjaya Dvivedi headed the Banking Infrastructure
Group and was the Corporate Executive Officer of Shinsei Bank from 2000 to 2010. Mr. Dvivedi was instrumental in
transforming Shinsei's IT platform as part of its strategy to improve customer service with conveniences such as internet
banking, 24-hr ATMs, managed and monitored remotely, and real-time data, while maintaining cost control. Mr. Dvivedi
has also served as the External Director of SIGMAXYZ Inc. from 2008 until 2011 and has since been involved in various
research and advisory capacities for the development of new technologies to benefit society. Mr. Dvivedi holds an
engineering degree from the Madhav College of Engineering in India and an MBA from the Indian Institute of
Management.
Lawrence Lavine, member of the Supervisory Board. Mr. Lavine is a Senior Managing Director of Ripplewood
Advisors LLC, following a 28 year career in investment banking. At Ripplewood Advisors LLC, Mr. Lavine has focused
primarily on companies in the financial services and telecommunications industries. Mr. Lavine was previously a
Managing Director of Credit Suisse First Boston in its Mergers and Acquisitions Group. He joined Credit Suisse First
Boston in 2000 as part of the acquisition of Donaldson, Lufkin & Jenrette where he had been a Managing Director in
Mergers and Acquisitions since 1987. He started his career on Wall Street at Kidder Peabody & Co. in 1976. Mr. Lavine
holds a BS from Northeastern University and an MBA from Harvard Business School.
Klāvs Vasks, member of the Supervisory Board. Mr. Vasks served as Chairman of Citadele Supervisory Board from
2010 until 2015 and now continues to be member of the Supervisory Board. He is currently serving as Chairman of the
Supervisory Board at TET, the largest telecommunication company in Latvia. He has 20 years of experience in the
banking sector. Previously he was vice president of the SEB Bank Latvia, also working as the director of the Restructuring
Department and Large Company Services Department. From 2010 to 2015, he chaired the Latvian Guarantee Agency.
Mr. Vasks holds a bachelor's degree from the Banking University College and an MBA degree from the Rīga School of
Business of the Rīga Technical University.
Nicholas Haag, Member of the Supervisory Board. Mr. Haag until June 2021 was senior independent non-executive
director (INED) and chairman of the audit committee of TBC Bank Group PLC, the largest Georgian bank and the
premium listed FTSE 250 company. He is an INED and chairs the audit, risk and compliance committee of Bayport
Management Ltd., the holding company for a leading African and Latin American financial solutions provider. Prior to
that, he was a Member of the Supervisory Board of Credit Bank of Moscow PJSC. Mr. Haag has a 30 year banking
career, half at Managing Director level, with various financial institutions including Barclays, Banque Paribas, ABN AMRO
and Royal Bank of Scotland, specialising in technology finance and equity capital markets. Mr. Haag holds a First Class
Honours Degree from the University of Oxford.
Karina Saroukhanian, Member of the Supervisory Board. Karina Saroukhanian is a Managing Director of Ripplewood
Advisors Limited. Before joining the company, from 2008, she worked as senior banker in the Financial Institutions team
of EBRD. At EBRD, she specialized in complex equity transactions, working with financial sponsors in multiple
jurisdictions. Prior to joining the EBRD, Karina was an Associate Director in the M&A group at Nomura International in
London and a Vice President at Sindicatum, a specialist financial advisory and asset management firm. Karina holds an
MSc in Economics from the London School of Economics and a degree in mathematical economics from the Moscow
State University.
AS Citadele banka
Management report | Corporate governance
AS Citadele banka Annual report for the year ended 31 December 2021 13
Sylvia Gansser-Potts, Member of the Supervisory Board. Sylvia Gansser-Potts is a Director of Obviam AG, a Swiss
impact asset manager. She is a Director and member of the audit and risk committees of the European Fund for
Southeast Europe (EFSE) which provides development finance to micro and small enterprises and private households
via selected financial institutions. Until 2017, Sylvia was a Managing Director at the EBRD with the overall responsibility
for EBRD's investments and operations in Central and Southeastern Europe. Over her 25 year career at the EBRD,
Sylvia run a succession of banking teams including the financial institutions operations in Central Europe, in
MENA/Turkey as well as the property and tourism team. Sylvia started her career at Swiss Bank Corporation (which later
merged to become UBS) in Switzerland and Japan. She holds a master's in business from the Université Paris Dauphine
-PSL, a bachelor's degree in Japanese language from the University of Paris and an MBA from INSEAD.
Management Board of the Bank as of 31/12/2021:
Name
Current position
Responsibility
Johan Åkerblom
Chairman of the Management Board
Chief Executive Officer
Valters Ābele
Member of the Management Board
Chief Financial Officer
Vladislavs Mironovs
Member of the Management Board
Chief Strategy Officer
Uldis Upenieks
Member of the Management Board
Chief Compliance Officer
Slavomir Mizak
Member of the Management Board
Chief Technology and Operations Officer
Vaidas Žagūnis
Member of the Management Board
Chief Corporate Commercial Officer
Rūta Ežerskienė
Member of the Management Board
Chief Retail Commercial Officer
Jūlija Lebedinska-Ļitvinova
Member of the Management Board
Chief Risk Officer
On 1 January 2021 Vladislavs Mironovs refocused on Strategy execution, Digital evolution and Business development,
Valters Ābele took Chief Financial Officer role and Slavomir Mizak started running the merged IT and Operations
organization. Former Chief Operations Officer Kaspars Jansons resigned on 1 January 2021. Effective from 1 February
2021 Rūta Ežerskienė joined the Management Board as Chief Retail Commercial Officer. Effective from 16 June 2021
Jūlija Lebedinska-Ļitvinova joined the Management Board and commenced duties of Chief Risk Officer of Citadele banka.
Johan Åkerblom, Chairman of the Management Board and Chief Executive Officer.
Mr. Akerblom is responsible for day-to-day management of Citadele operations. Before joining Citadele, he worked for
SEB group as Chief Financial Officer for its Baltic business division in 2016 and 2017 and prior to that Johan Akerblom
was Chief Financial Officer and member of the Management Board of SEB AG, SEB group's German subsidiary. He has
more than 10 years of banking experience and started his career as a management consultant with McKinsey & Co
where he spent 4 years. Johan Åkerblom holds a Master's Degree in Industrial Management and engineering from the
Lund Institution of Technology. Member of the Management Board since 1 February 2018, Chairman of the Management
Board, CEO from 2 March 2020.
Valters Ābele, Chief Financial Officer.
Mr. Ābele holds an MBA from the University of Latvia where he studied between 1993 and 1999. He spent part of his
studies at Western Michigan University on a US Government- sponsored scholarship programme. He has extensive audit
experience, he became an ACCA member and Latvian Certified Auditor in 2004 and worked at both Ernst & Young
(2002-2008) and Arthur Andersen (1998- 2002) before moving into the banking sector. He now has thirteen years of
experience in the banking industry, having joined Parex in 2008. Mr Ābele is a Financial Director at Citadele and his
responsibilities include day-to-day management of Group's Finance and Treasury functions. He was appointed to the
management board of Parex in 2008 and joined Citadele's Management Board in 2010.
Vladislavs Mironovs, Chief Strategy Officer.
Mr. Mironovs is responsible for the Group's business strategy implementation, development of Citadele's products and
services and its digital evolution. He joined Citadele in July 2015 as Head of Strategic projects. His former experience
includes various positions in GE Money Bank. The last two years before joining Citadele, he worked as Strategic
Initiatives Leader in GE Capital HQ in USA, leading the projects and assisting in developing global strategy around trade
finance and multinational clients. Mr. Mironovs held a position of Business Development Manager in GE Capital, UK
(2012-2013) and Sales and Marketing Director in GE Money Bank Latvia (2010-2012). Mr. Mironovs holds Executive
MBA from Riga Business School.
Uldis Upenieks, Chief Compliance Officer.
Mr. Upenieks is responsible for the Compliance area in the Group. He has 25 years' experience in the financial sector,
of which last 20 years he has worked in the banking sector. Since November 2012 Mr. Upenieks was a Chairman of the
Board at "CBL Asset Management". Before that he worked in PrivatBank – as a Board member and as a head of internal
audit. Prior to that Mr. Upenieks was responsible for client oversight function (2002-2009), and a vice president and the
deputy director of the Risk and Compliance Sector (2009-2011) at Citadele. Mr. Upenieks holds a master's degree in
business administration and a bachelor's degree in economics from the Riga Technical University and he has studied at
Riga Graduate School of Law.
AS Citadele banka
Management report | Corporate governance
AS Citadele banka Annual report for the year ended 31 December 2021 14
Slavomir Mizak, Chief Technology and Operations Officer.
Mr. Mizak is responsible for the Group's IT and technology development. He has been working for the Group since
August 1, 2017. Before joining, Mr. Mizak was a member of the Management Board and held a position of the Chief
Information Officer and the Chief Operating Officer in Zuno Bank AG (Austria) since 2014. Prior to that, he held positions
of the Head of Information Technology and the Head of Information Technology Development in Zuno Bank. Before that
he worked as a consultant and manager in the consulting division for financial services sector in Accenture (2002-2009).
Mr. Mizak holds a master's degree in Business Administration from the University of Economics in Bratislava.
Vaidas Žagūnis, Chief Corporate Commercial Officer.
Mr. Žagūnis is responsible for the development and management of the corporate business in the Baltics. Before joining
Citadele, he worked for SEB Lithuania as Head of Retail banking, Member of the Management Board, Executive Vice
President. Prior to that, Vaidas Žagūnis held different managerial positions mainly in SME business area. He has almost
18 years of banking experience. Vaidas Žagūnis holds a Master's Degree in Business Administration from Kaunas
University of Technology and also has educated in Massachusetts Institute of Technology (MIT) in United States. Member
of the Management Board since 1 March 2020.
Rūta Ežerskienė, Chief Retail Commercial Officer.
Rūta Ežerskienė is responsible for services to retail clients, as well as organisation and supervision of the operations of
Citadele's branches, client service centers and settlement groups. She joined AS „Citadele banka” in January 2021. Rūta
most recently was Head of Baltic Retail for AON insurance broker since 2018. Before that she held different management
positions in SEB group, both on Baltic level and in Lithuania, including Head of Sales Department and Business
transformation (years 2017-2018), deputy CEO, Board member in SEB Life Insurance (years 2015-2017). She has
almost 20 years of banking experience. Rūta Ežerskienė holds Master of Business Management degree from Kaunas
University of Technology. She has graduated Board Member Education in Baltic Institute of Corporate Governance.
Member of the Management Board since 1 February 2021.
Jūlija Lebedinska-Ļitvinova, Chief Risk Officer.
Jūlija Lebedinska-Ļitvinova is Risk Director at Citadele and is responsible for the Group's risk management area as of
June 2021. Jūlija Lebedinska-Ļitvinova has an extensive experience of more than 15 years in risk management area in
financial sector. Jūlija comes from a position as Group Chief Risk Officer for Mogo Finance since 2019. Before that she
held Chief Risk Officer's position in 4Finance Group (2015-2019), Head of Antifraud and Risk processes position in Home
Credit and Finance Bank, Russia (2013-2015) and Chief Risk Officer's position in Home Credit Bank, Belarus (2011-
2013). Jūlija Lebedinska-Ļitvinova has a PhD degree in natural sciences from the University of Latvia. Member of the
Management Board since 21 June 2021.
AS Citadele banka
Financial statements | Statements of the Management’s responsibility
AS Citadele banka Annual report for the year ended 31 December 2021 15
STATEMENT OF MANAGEMENT’S RESPONSIBILITY
The Management of AS Citadele banka (hereinafter – the Bank) is responsible for the preparation of the financial
statements of the Bank and for the preparation of the consolidated financial statements of the Bank and its subsidiaries
(hereinafter – the Group).
The financial statements set out on pages 16 to 75 are prepared in accordance with the source documents and present
the financial position of the Bank and the Group as of 31 December 2021 and 31 December 2020 and the results of their
operations, changes in shareholders’ equity and cash flows for the years then ended. The management report set out
on pages 4 to 14 presents fairly the financial results of the reporting period and future prospects of the Bank and the
Group.
The financial statements are prepared on a going concern basis in accordance with International Financial Reporting
Standards as adopted by the European Union. Appropriate accounting policies have been applied on a consistent basis.
Prudent and reasonable judgments and estimates have been made by the Management in the preparation of the financial
statements.
The Management of AS Citadele banka is responsible for the maintenance of proper accounting records, the
safeguarding of the Group’s assets and the prevention and detection of fraud and other irregularities in the Group. They
are also responsible for operating the Bank in compliance with the Law on Credit Institutions, regulations of the Financial
and Capital Market Commission and other legislation of the Republic of Latvia applicable for credit institutions.
Johan Åkerblom
Chairman of the Management Board
Klāvs Vasks
Member of the Supervisory Board
THE DOCUMENT IS SIGNED USING A QUALIFIED ELECTRONIC SIGNATURE AND CONTAINS A TIMESTAMP
AS Citadele banka
Financial statements | Statement of income
AS Citadele banka Annual report for the year ended 31 December 2021 16
STATEMENT OF INCOME
EUR thousands
2021
2020
2021
2020
Note
Group
Group
Bank
Bank
Interest income
5
93,458
81,144
Interest expense
5
(15,890 )
(22,584 )
(14,994)
(22,484)
Net interest income
78,464
58,660
Fee and commission income
6
49,720
43,445
Fee and commission expense
6
(24,198 )
(21,580 )
(23,397)
(20,745)
Net fee and commission income
26,323
22,700
Net financial income
7
(17,463 )
6,682
(17,591)
Net other income / (expense)
8
1,782
(163)
Operating income
113,251
63,606
Staff costs
9
(61,111 )
(50,888 )
(45,900)
(44,141)
Other operating expenses
10
(25,153 )
(21,057 )
(18,760)
(17,540)
Depreciation and amortisation
20
(8,773 )
(8,044 )
(7,616)
(7,688)
Operating expense
(95,037 )
(79,989 )
(72,276)
(69,369)
Profit before impairment
40,975
(5,763)
Net credit losses
11
(1,613 )
(9,351 )
(11,742)
(10,379)
Other impairment losses and other provisions
12
(198 )
(1,106 )
941
11,805
Operating profit / (loss) before non-current
assets held for sale
30,174
(4,337)
Result from non-current assets held for sale
(213 )
(307 )
(213)
(307)
Operating profit / (loss)
29,961
(4,644)
Income tax
13
(1,597 )
(306 )
(318)
(117)
Net profit / (loss)
29,643
(4,761)
Basic earnings per share in EUR
26
0.19
(0.03)
Diluted earnings per share in EUR
26
0.19
(0.03)
The notes on pages 21 to 75 are an integral part of these financial statements.
AS Citadele banka
Financial statements | Statement of comprehensive income
AS Citadele banka Annual report for the year ended 31 December 2021 17
STATEMENT OF COMPREHENSIVE INCOME
EUR thousands
2021
2020
2021
2020
Group
Group
Bank
Bank
Net profit / (loss)
29,643
(4,761)
Other comprehensive income items that are or may be
reclassified to profit or loss:
Fair value revaluation reserve
Fair value revaluation reserve charged to statement of
income (Note 7)
(542 )
(1,123 )
(428)
(1,023)
Change in fair value of debt securities and similar
(3,717 )
(809 )
(2,349)
(609)
Deferred income tax charged / (credited) directly to
equity
-
-
Other reserves
Foreign exchange retranslation
-
-
Other comprehensive income items that may not be
reclassified to profit or loss:
Fair value revaluation reserve
Change in fair value of equity and similar instruments
(42 )
(42)
8
Transfer to retained earnings at disposal
49
927
Other comprehensive income / (loss)
(3,372 )
(765 )
(2,770)
(697)
Total comprehensive income / (loss)
26,873
(5,458)
The notes on pages 21 to 75 are an integral part of these financial statements.
AS Citadele banka
Financial statements | Balance sheet
AS Citadele banka Annual report for the year ended 31 December 2021 18
BALANCE SHEET
EUR thousands
31/12/2021
31/12/2020
31/12/2021
31/12/2020
Note
Group
Group
Bank
Bank
Assets
Cash and cash balances at central banks
14
361,626
1,131,008
Loans to credit institutions
35,693
40,289
Debt securities
15
1,652,308
1,563,675
Loans to public
16
2,609,713
1,518,313
Equity instruments
18
1,279
4,764
Other financial instruments
18
7,400
13,834
Derivatives
27
4,303
1,474
Investments in related entities
19
77,087
46,756
Tangible assets
20
11,496
14,143
Intangible assets
20
6,083
5,832
Current income tax assets
13
871
878
Deferred income tax assets
13
2,179
2,179
Non-current assets held for sale
946
946
Other assets
21
28,912
16,355
Total assets
4,799,896
4,360,446
Liabilities
Deposits from credit institutions and central banks
22
499,628
470,959
Deposits and borrowings from customers
23
3,665,524
3,478,096
Debt securities issued
24
258,895
60,080
Derivatives
27
739
4,461
Provisions
11
3,882
2,133
Current income tax liabilities
13
189
115
Deferred income tax liabilities
13
-
-
Other liabilities
25
25,476
27,003
Total liabilities
4,454,333
4,042,847
Equity
Share capital
26
156,888
156,556
Reserves and other capital components
2,127
4,469
Retained earnings
186,548
156,574
Total equity
345,563
317,599
Total liabilities and equity
4,799,896
4,360,446
Off-balance sheet items
Guarantees and letters of credit
27
34,265
23,903
38,863
23,246
Financial commitments
27
387,943
261,050
431,065
276,089
The notes on pages 21 to 75 are an integral part of these financial statements.
AS Citadele banka
Financial statements | Statement of changes in equity
AS Citadele banka Annual report for the year ended 31 December 2021 19
STATEMENT OF CHANGES IN EQUITY
Group, EUR thousands
Issued
Share
capital
Share
premium
Securities
fair value
revaluation
reserve
(Note 15)
Foreign
currency
retrans-
lation
Share
based
payments
Retained
earnings
Total
equity
Balance as of 31/12/2019
Share based payments to employees
(Note 9 and Note 26)
Total comprehensive income
(1,836 )
Net (loss) for the period
Other comprehensive income / (loss)
for the period
(1,836 )
(765 )
Balance as of 31/12/2020
Share based payments to employees
(Note 9 and Note 26)
Total comprehensive income
(4,089 )
Net profit for the period
Other comprehensive income / (loss)
for the period
(4,089 )
(3,372 )
Balance as of 31/12/2021
Bank, EUR thousands
Issued
Share
capital
Share
premium
Securities
fair value
revaluation
reserve
(Note 15)
Share
based
payments
Retained
earnings
Total
equity
Balance as of 31/12/2019
156,556
-
4,213
1,199
160,346
322,314
Share based payments to employees
(Note 9 and Note 26)
-
-
-
681
62
743
Total comprehensive income
-
-
(1,624)
-
(3,834)
(5,458)
Net (loss) for the period
-
-
-
-
(4,761)
(4,761)
Other comprehensive income / (loss)
for the period
-
-
(1,624)
-
927
(697)
Balance as of 31/12/2020
156,556
-
2,589
1,880
156,574
317,599
Share based payments to employees
(Note 9 and Note 26)
332
239
-
238
282
1,091
Total comprehensive income
-
-
(2,819)
-
29,692
26,873
Net profit for the period
-
-
-
-
29,643
29,643
Other comprehensive income / (loss)
for the period
-
-
(2,819)
-
49
(2,770)
Balance as of 31/12/2021
156,888
239
(230)
2,118
186,548
345,563
The notes on pages 21 to 75 are an integral part of these financial statements.
AS Citadele banka
Financial statements | Statement of cash flows
AS Citadele banka Annual report for the year ended 31 December 2021 20
STATEMENT OF CASH FLOWS
EUR thousands
2021
2020
2021
2020
Note
Group
Group
Bank
Bank
Operating activities
Operating profit before tax
29,961
(4,644)
Interest income
5
(123,974 )
(90,124 )
(93,458)
(81,144)
Interest expense
5
14,994
22,484
Dividends income
(37 )
(42 )
(37)
(42)
Depreciation and amortisation
7,616
7,688
Impairment allowances and provisions
10,801
(1,426)
Sale of tangible assets
(29 )
(17,491 )
(29)
(813)
Currency translation and other non-cash items
2,281
15,396
Cash flows from the income statement
(27,947 )
(51,425 )
(27,871)
(42,501)
(Increase) / decrease in loans to public
(368,860 )
(1,107,707)
58,927
Increase / (decrease) in deposits and borrowings from
customers
189,996
486,119
(Increase) / decrease in loans to credit institutions
(1,526 )
(1,509)
7,435
Increase / (decrease) in deposits from central banks and
credit institutions
22,763
433,077
(Increase) / decrease in other items at fair value through
profit or loss
(6,551 )
(6,551)
3,418
(Increase) / decrease in other assets
(9,189)
8,366
Increase / (decrease) in other liabilities
833
(1,599)
Cash flows from operating activities before interest and
corporate income tax
(210,506 )
(939,235)
953,242
Interest received
90,094
81,725
Interest paid
(14,437 )
(16,459 )
(13,521)
(16,342)
Corporate income tax paid
(787 )
(811 )
(237)
(173)
Cash flows from operating activities
(105,790 )
(862,899)
1,018,452
Investing activities
Acquisition of tangible and intangible assets
(22,616 )
(5,222 )
(4,676)
(5,168)
Disposal of tangible and intangible assets
403
2,893
Investments in debt securities and other financial
instruments
(387,513 )
(1,427,884 )
(367,520)
(1,268,422)
Proceeds from debt securities and other financial
instruments
288,074
653,020
Dividends received
37
42
Decrease in cash and cash equivalents as a result of
acquisition of SIA UniCredit Leasing
19
(798,550 )
-
-
Sale or investments in subsidiaries
(29,203)
649
Cash flows from investing activities
(857,664 )
(516,556 )
(112,885)
(616,986)
Financing activities
Proceeds from issue of debt securities
238,251
-
Repayment of debt securities
(40,000 )
(40,000)
-
Interest paid on debt securities issued
(3,670 )
(3,636 )
(3,670)
(3,636)
Repayment of lease liabilities
(3,334 )
(1,989 )
(3,328)
(4,003)
Cash flows from financing activities
(5,625 )
191,253
(7,639)
Cash flows for the period
(772,207 )
(784,531)
393,827
Cash and cash equivalents at the beginning of the period
1,148,197
754,370
Cash and cash equivalents at the end of the period
30
363,666
1,148,197
The notes on pages 21 to 75 are an integral part of these financial statements.
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 21
NOTES TO THE FINANCIAL STATEMENTS
If not mentioned otherwise, referral to the Group’s policies and procedures should be also considered as referral to the respective
Bank’s policies and procedures. Figures in parenthesis represent amounts as of 31 December 2020 or for the year ended 31
December 2020.
NOTE 1. AUTHORISATION OF THE FINANCIAL STATEMENTS
These financial statements have been authorised for issuance by the Management Board and comprise the financial information of
AS Citadele banka (hereinafter – the Bank or Citadele) and its subsidiaries (together – the Group).
NOTE 2. GENERAL INFORMATION
the Group, which has a subsidiary bank in Switzerland and several financial services subsidiaries. The Group’s main market is the
Baltics (Latvia, Lithuania and Estonia). Citadele was registered as a joint stock company on 30 June 2010. Citadele commenced its
operations on 1 August 2010.
As of 31 December 2021, the Group had 1,335 (2020: 1,230) and the Bank had 1,100 (2020: 1,152) full time equivalent active
employees. Increase in the Group’s full time equivalent active employees is a result of the acquisition of SIA Citadele Leasing
(previously SIA UniCredit Leasing) in the beginning of 2021.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) New standards and amendments
New standards, interpretations and amendments which were not applicable to the previous annual financial statements have been
issued. Some of the standards become effective in 2021, others become effective for later reporting periods. In this section those
relevant for the Group are summarised. Where the implementation impact was or is expected to be reasonably material it is disclosed.
New requirements effective for 2021 which did not have a significant effect to the Group
Amendments to IFRS 16 – COVID-19-Related Rent Concessions
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 – Interest Rate Benchmark Reform – Phase 2
Upcoming requirements not in force from 1 January 2021
Certain new standards, amendments to standards and interpretations have been endorsed by EU for the accounting periods beginning
after 1 January 2021 or are not yet effective in the EU. These standards have not been applied in preparing these financial statements.
The Group does not plan to adopt any of these standards early. The Group is in the process of evaluating the potential effect if any of
changes arise from these new standards and interpretations.
IFRS 17 - Insurance Contracts. Expected to be effective for annual reporting periods beginning on or after 1 January 2023 with earlier
application permitted as long as IFRS 9 and IFRS 15 are also applied. The upcoming standard combines current measurement of the
future cash flows with the recognition of profit over the period that services are provided under the contract. Groups of insurance
contracts have to be measured at a risk-adjusted present value of the future cash flows adjusted for unearned profits or losses. Profit
from a group of insurance contracts is recognised over the period the insurance cover is provided, and as the risk is released; loss
from a group of contracts is recognised immediately. The standard requires presenting insurance service results separately from
insurance finance income or expenses and requires making an accounting policy choice of whether to recognise all insurance finance
income or expenses in profit or loss or to recognise some of that income or expenses in other comprehensive income.
The Group had set up an internal IFRS 17 implementation working group. Within the scope of the project, the Group reworks models,
IT systems, processes and documentation which will be followed by final testing and validation. External expertise is to be attracted
where and when deemed necessary. As much as possible the Group leverages existing processes, systems, models and data,
although in certain areas new models and revisions to the existing models are needed to be developed. The Group is in the process
of quantifying the expected impact, as of now having re-assessed part of the agreements. Total insurance liabilities recognised under
the current standards are presented in Note 25 (Other Liabilities) and amount to EUR 41.7 million.
Amendments to IAS 1 – Classification of liabilities as current or non-current
Amendments to IAS 1 and IFRS Practice Statement 2 – Disclosure of Accounting Policy
Amendments to IAS 8 – Definition of Accounting Estimate
Amendments to IFRS 10 and IAS 28 – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
Amendments to IAS 37 – Onerous contracts – Cost of Fulfilling a Contract
Amendments to IAS 16 – Property, Plant and Equipment: Proceeds before Intended Use
Amendments to IFRS 3 – Reference to Conceptual Framework
Amendments to IAS 1 – Classification of Liabilities as Current or Non-current
Amendments to IAS 12 – Income Taxes – Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction
b) Basis of preparation
These financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted in the
European Union and relevant Financial and Capital Markets Commission’s (FCMC) regulations on a going concern basis. The financial
statements are prepared under the historical cost convention, except for assets measured at fair value through other comprehensive
income, financial assets and financial liabilities measured at fair value through profit or loss and all derivative contracts, which have
been measured at fair value.
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 22
The Management considers going concern basis of accounting appropriate in preparing these financial statements; there are no
material uncertainties in applying going concern basis of accounting. The Group’s financial and capital position, business activities,
its risk management objectives and policies and the major risks to which the Group is exposed to are disclosed in the Risk
Management section of these financial statements. Liquidity risk management is particularly important in respect to the going concern
convention, as a failure to have a sufficient funding to meet payment obligations due may result in an extraordinary borrowing at
excessive cost, regulatory requirement breach, delays in day-to-day settlements activities or cause the Group to no longer be a going
concern; for more details refer to Liquidity risk management section. Regulatory compliance, especially capital adequacy
requirements, is also significant to the going concern of the Group. The Group conducts and plans business in accordance with the
available capital and in line with other regulatory requirements. For capital adequacy ratios as at period end refer to the Capital
management section. The Group has implemented a comprehensive liquidity risk management and capital planning framework and
policies and procedures to manage other risks.
The preparation of financial statements in conformity with IFRS as adopted by the EU requires use of estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on
the Management’s best knowledge of current events and actions, actual results ultimately may differ from the estimated. For more
details refer to paragraph ee).
c) Functional and Presentation Currency
The functional currency of each of the Group’s consolidated entities is the currency of the primary economic environment in which the
entity operates. The functional currency of the Bank, its Baltic subsidiaries, and the Group’s presentation currency, is Euro (“EUR”).
The functional currency of majority of the Group’s foreign subsidiaries is also Euro. The accompanying financial statements are
presented in thousands of Euros.
d) Basis of consolidation
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financials of
subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which
control ceases. The investments in the subsidiaries are presented in the Bank’s financial statements at cost. More detailed information
on the Group’s subsidiaries is presented in Note 19 (Investments in Related Entities).
The financial statements of AS Citadele banka and its subsidiaries are consolidated in the Group’s financial statements on a line by
line basis by aggregating like items of assets, liabilities, income and expenses. For the purposes of consolidation, intragroup balances
and intragroup transactions, including interest income and expense as well as unrealised profits and loss resulting from intragroup
transactions, are eliminated in the Group’s financial statements.
e) Income and expense recognition
Income and revenue are only recognised, if the Group is likely to receive economic benefits associated with the transaction. Interest
income and expense items are recognised on an accrual basis using the effective interest rate. Commissions in respect of the
acquisition of financial assets or the issue of financial liabilities that are not at fair value through profit or loss are deferred and
recognised as an adjustment to the effective yield on the respective asset or liability. The Group presents the fee income from financial
guarantees as part of fee and commission income. For loan commitments which are not expected to result in draw-down, the
reservation fee is credited to the income statement on a straight-line basis over the commitment period. For a contract with a customer
containing a financial instrument, the part that relates to financial instrument is measured and separated first and then to the residual
part recognised appropriately as revenue from contracts with customers.
Revenue from contracts with customers, including account servicing fees, asset management fees, custody fees and sales
commissions are credited to the statement of income as the related services are performed and control over a service is transferred
to a customer. Revenue from customers is recognised as fee and commission income or other income. Revenue may be recognised
at a point in time or over the time. Over time revenue recognition is proportional to progress towards satisfying a performance obligation
by transferring control of promised services to a customer. Revenue which does not qualify for recognition over time is recognised at
a point in time when the service is rendered or product is sold. The Group has no material contract assets and contract liabilities from
contracts with customers.
The nature and timing of the satisfaction of performance obligations in contracts with customers, including significant payment terms,
and the related revenue recognition policies for the major categories of commission income:
Cards, payments and transactions – regular fees for accounts servicing, cards and product packages are charged to the customers
on a monthly basis according to the price list; revenue is recognised over time as the services are provided. Transaction-based fees
for payments, foreign to the customer’s when the transaction takes place and revenue is recognised at the point in time when the
currency transactions and similar are charged transaction takes place.
Asset management, custody and securities – fees are calculated based on a fixed percentage of the value of assets managed or held
in custody and are deducted from the customer’s account on a monthly basis. Upon commencement of the service an insignificant
non-refundable initial fee may be charged as a compensation for client’s screening, agreement and other services provided. Revenue
from management and custody services is recognised over time as the services are provided.
Fee and commission expenses relate mainly to transaction and service fees, which are expensed as the services are received. Penalty
income is recognised on cash-received basis as often there is significant uncertainty about collectability.
f) Foreign currency translation
Transactions denominated in foreign currencies are recorded in Euros at the rates of exchange effective at the date of the transaction.
Non-monetary items that are measured at fair value in a foreign currency, such as investments in equity instruments, are translated
using the exchange rates at the date when the fair value was determined and the impact from changes in foreign exchange rates are
treated as foreign exchange gain/loss in the statement of income, with exception of non-monetary financial assets at fair value through
other comprehensive income for which any foreign exchange gain or loss is recognised in other comprehensive income. Monetary
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 23
assets and liabilities denominated in foreign currencies are translated into functional currency at the official rate of exchange prevailing
at the reporting date. Any gain or loss resulting from a change in rates of exchange subsequent to the date of the transaction is
included in the statement of income as profit or loss from revaluation of foreign currency positions.
The results and financial position of all the Group’s entities that have a functional currency different from the presentation currency
are translated into the presentation currency as follows:
• assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that
statement of financial position;
• income and expenses for each statement of income are translated at average exchange rates (unless this average is not a
reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and
expenses are translated at the dates of the transactions);
• all resulting exchange differences are recognised as other comprehensive income.
g) Staff costs and related contributions
The Group recognises employee financial benefits when an employee has rendered services in exchange for these financial benefits.
The Group's personnel expenses relate mostly to short term benefits and related tax expense. The Group pays social security
contributions to state pension insurance and to state-funded pension scheme in accordance with the relevant regulations. In most
countries where the Group operates, a part of the social insurance contributions is used to fund the state defined contribution pension
system. The state-funded pension scheme is a defined contribution plan under which the Group pay fixed contributions determined
by law and will have no legal or constructive obligation to pay further contributions if the state pension insurance system or the state-
funded pension scheme is not able to settle their liabilities to employees. The social security contributions are accrued in the period
in which the associated services are rendered by the employees of the Group.
Citadele has a multi-year long-term incentive plans for its employees. Under the approved long-term incentive plans share options
are granted. Settlement is expected in shares of Citadele. Each option grants eligibility to one ordinary share of Citadele and has an
exercise price of null euros. Vesting dates are predetermined. For each participant individual performance conditions aligned with
business plan and strategic objectives of Citadele apply. The Remuneration and Nomination Committee of the Supervisory Board is
responsible for aligning, setting and amending individual performance conditions. Granted options may be forfeited to the extent any
of the performance conditions are not satisfied at sole discretion of the committee.
Expense for share-based remuneration is measured at fair value at the grant date. Share-based remuneration may be in a form of
Citadele shares or conditional share options. The grant date is the date at which the entity and the participating employee agree to a
share-based payment arrangement and an internal approval is obtained. The fair value is the estimated share price reduced by the
present value of dividends that participants will not receive and value of other restricting terms of the compensation agreed. Expense
for share-based remuneration is re-measured only if the compensation arrangement is modified so that the fair value after modification
has increased compared to the fair value before modification. Such increase is recognised as compensation expense at the re-
measurement date.
The expense is recognised on a straight-line basis over the period of the remuneration program as intention is to receive services
from employees over the whole period. For share options granted a corresponding increase in equity is recognised as other reserves.
Estimates of actual or expected forfeitures are re-estimated at each reporting date and if necessary, previously recognised other
reserves are reversed directly to the retained earnings. After deferral period, when vesting conditions are met and conditional share
option exercised, previously recognised other reserves are transferred to issued share capital and share premium accounts.
h) Customer loyalty programmes
To reward and promote customers to actively use products of the Group, the Group has implemented several customer loyalty
programs. Loyalty point and similar incentives represent discounts that a customer can choose to use in the future to acquire additional
goods or services of retail nature. A portion of the transaction price is allocated to the material performance obligation not yet fulfilled.
All benefits awarded to customers are fully accrued at the moment the benefits are awarded. The amount allocated is based on the
stand-alone price of the loyalty incentive. Revenue and related costs in the income statement are recognised when the Group has
satisfied its performance obligations relating to the loyalty incentive or when the incentive expire or are cancelled.
i) Corporate income tax
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the
reporting date, and any adjustment to tax payable in respect of previous years. Current corporate income tax assets and liabilities are
measured at the amount expected to be obtained from or paid to tax authorities. Certain Group companies pay income tax on profit
distribution (e.g. dividends). Correspondingly, for these Group companies, income tax on profit distribution is recognised as expenses
only at the moment dividends are declared.
Deferred income tax is provided using the balance sheet liability method for tax loss carry forwards and temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. In accordance with the
initial recognition exemption, deferred taxes are not recorded for temporary differences on initial recognition of an asset or a liability
in a transaction other than a business combination if the transaction, when initially recorded, affects neither accounting nor taxable
profit. Deferred tax liabilities are not recorded for temporary differences on initial recognition of goodwill and subsequently for goodwill
which is not deductible for tax purposes. Deferred tax balances are measured at tax rates enacted or substantively enacted at the
end of the reporting period which are expected to apply to the period when the temporary differences are reversed or the tax loss
carry forwards are utilised. The deferred tax balance is measured at a tax rate which is applicable for undistributed profits until decision
of profits distribution is made. Therefore, for jurisdictions where income tax is payable on profit distribution (e.g. dividends) any deferred
tax liabilities or benefits are recognised at a tax rate applicable to undistributed profits. When applicable at the Group level the deferred
tax is recognised at the expected future taxable dividend rate. Deferred tax assets and liabilities are netted only within the individual
companies of the Group and only if certain criteria are met. Deferred tax assets for deductible temporary differences and tax loss carry
forwards are recorded only to the extent that it is probable that future taxable profit will be available against which the deductions can
be utilised.
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 24
The carrying amount of deferred corporate income tax asset, if any, is reviewed at each reporting date and reduced to the extent that
it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
The future taxable profits and the amount of tax benefits that are probable in the future are based on a medium-term financial forecast
prepared by management and extrapolated results thereafter. The financial forecast is based on management expectations that are
believed to be reasonable under the current circumstances.
j) Financial instruments classification and measurement
The Group recognises a financial asset on its balance sheet when, and only when, the Group becomes a party to the contract.
Financial assets are classified as either subsequently measured at amortised cost, fair value through other comprehensive income or
fair value through profit or loss. The basis for classification is both business model for managing the financial assets and the contractual
cash flow characteristics of the financial asset. At acquisition the applicable classification is evaluated based on the guidelines
established by the Group. For financial asset classification to a particular category, the Group at inception determines that the asset
meets the relevant business model and contractual cash flow criteria. The business model is observable through the activities of the
Group. It refers to how the Group typically manages its financial assets in order to generate cash flows; thus, the assessment is not
performed on the basis of scenarios that the Group does not reasonably expect to occur. In a stress case, if cash flows are realised
in a way that is different from the Group’s expectations embedded in the business model, it does not give rise to a prior period error
nor does it change the classification of the remaining financial assets held in that business model. However, for future acquisitions
past cash flows are considered and may give rise to change in the business model.
At initial recognition, the financial assets or financial liabilities are measured at fair value, plus, in the case of investments not at fair
value through profit or loss, directly attributable incremental transaction costs. All “regular way” purchases and sales of investments
are recognised using settlement date accounting. The settlement date is the date when an asset is delivered to or by the Group.
Settlement date accounting refers to the recognition of an asset on the day it is transferred to the Group and to the de-recognition of
an asset, on the day that it is transferred by the Group.
Financial assets and liabilities measured at amortised cost
For a financial asset to be measured at amortised cost it should both be held within a business model whose objective is to hold
financial assets in order to collect contractual cash flows and the contractual terms of the financial asset should give rise on specified
dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial assets measured at amortised cost are carried at amortised cost using the effective interest rate method, less any allowance
for impairment. The impairment allowance for financial assets that are not-credit impaired (stage 1 and stage 2 classified) is measured
as the present value of all cash shortfalls which is the difference between the cash flows due to the Group in accordance with contract
and the cash flows that the Group expects to receive discounted at the effective interest rate of a financial asset. The impairment
allowance for financial assets that are credit impaired at the reporting date (stage 3 classified) is measured as the difference between
the gross carrying amount and the present value of estimated future cash flows discounted at the effective interest rate of the financial
asset. For the purchased or originated credit-impaired financial assets the credit-adjusted effective interest rate is applied from initial
recognition.
A gain or loss on a financial asset that is measured at amortised cost is recognised in the profit or loss when the financial asset is
derecognised, reclassified, through the amortisation process or to recognise impairment gains or losses. Financial assets at amortised
cost are recognised on drawdown. From the date of signing a contractual agreement till drawdown, the contractually committed
amounts are accounted for as off-balance sheet commitments.
Modification or renegotiation of contractual cash flows of a financial asset that does not result in de-recognition of that financial asset,
requires the Group to recalculate the gross carrying amount of the financial asset and recognise a modification gain or loss in profit
or loss. The gross carrying amount is recalculated as the present value of the renegotiated or modified contractual cash flows through
the expected life of the asset that are discounted at the financial asset’s original effective interest rate or credit-adjusted effective
interest rate for purchased or originated credit-impaired financial assets. When estimating the expected cash flows, all contractual
terms and payments are considered, except for the expected credit losses, unless the financial asset is a purchased or originated
credit-impaired financial asset. Costs or fees incurred adjust the carrying amount of the modified financial asset and are amortised
over the remaining term of the modified financial asset.
When the financial asset or part of it cannot be recovered, it or the respective part is written-off and charged against impairment for
credit losses. The Group makes the decision regarding any write-off of financial assets based on existence and valuation of collateral
available for a foreclosure, and the likelihood and the amount of any other expected future cash flows. Recoveries of previously
written-off assets or parts of assets are credited to the statement of income.
The Group classifies all financial liabilities as subsequently measured at amortised cost using the effective interest rate method, except
for derivatives and certain deposit components of the insurance plan liabilities which are measured at fair value through profit or loss.
A gain or loss on a financial liability that is measured at amortised cost is recognised in profit or loss when the financial liability is
derecognised and through the amortisation process.
Financial assets measured at fair value through other comprehensive income
For a financial asset to be measured at fair value through other comprehensive income it should both be held within a business model
whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the
financial asset should give rise on specified dates to cash flows that are solely payments of principal and interest on the principal
amount outstanding. The Group’s financial assets measured at fair value through other comprehensive income are intended to be
held for an undefined period of time and may be sold in response to needs for liquidity or changes in interest rates, exchange rates or
equity prices.
Financial assets measured at fair value through other comprehensive income are subsequently re-measured at fair value based on
available market prices. A revaluation gain or loss on a financial asset measured at fair value through other comprehensive income is
recognised in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses, until the
financial asset is derecognised or reclassified. For debt securities the difference between the initial carrying amount and amortised
cost determined by the effective interest rate method is treated as interest income and is recognised in profit or loss; on derecognising
the cumulative fair value revaluation gain or loss previously recognised in other comprehensive income is reclassified from equity to
profit or loss.
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 25
For non-equity financial instruments measured at fair value through other comprehensive income, the loss allowance is recognised in
other comprehensive income and does not reduce the carrying amount in the balance sheet. Impairment gains or losses are
recognised in profit or loss.
For equity instruments that are neither held for trading nor acquired in a business combination, the Group at initial recognition, has to
make an irrevocable election to present subsequent changes in the fair value of each instrument in other comprehensive income or
profit or loss. This election is made on an instrument-by-instrument basis. Amounts presented in other comprehensive income
subsequently are not transferred to profit or loss, but cumulative gain or loss on disposal is transferred directly to retained earnings.
Dividends on equity instruments classified at fair value through other comprehensive income are recognised in the statement of
income. Such equity instruments are not tested for impairment, but carried at fair value.
Financial assets and liabilities measured at fair value through profit or loss
A financial asset is measured at fair value through profit or loss unless it is measured at amortised cost or at fair value through other
comprehensive income. For equity instruments that would otherwise be measured at fair value through profit or loss an irrevocable
election at initial recognition on instrument-by-instrument basis is made to present subsequent changes in fair value in other
comprehensive income. Also a financial asset or liability, at initial recognition, may be irrevocably designated as measured at fair
value through profit or loss if doing so eliminates or significantly reduces “accounting mismatch” that would otherwise arise from
measuring assets or liabilities or recognising the gains and losses on them on different bases, or when a group of financial liabilities
or a group of financial assets and financial liabilities are managed and its performance evaluated on a fair value basis, in accordance
with a documented risk management or investment strategy, and information about the group is provided internally on that basis to
the management.
Excluding interest on interest rate swaps, interest on financial assets measured at fair value through profit or loss is included in net
interest income. Revaluation and trading gains or losses arising from changes in fair value of financial assets or financial liabilities
that are measured at fair value through profit or loss, as well as interest on interest rate swaps, are recognised directly in the statement
of income as net financial income. Such financial assets and liabilities are subsequently re-measured at fair value based on available
market prices or quotes of brokers.
Included in this category are (a) unit-linked investment contract liabilities and respective investments and (b) certain life insurance
contract liabilities, which are managed and evaluated on a fair value basis, in accordance with a documented risk management or
investment strategy. According to unit-linked investment contract terms, the credit risk associated with the investments made by the
insurance underwriter is fully attributable to the counterparty entering into the insurance agreement and not the underwriter. As such,
by designating both assets acquired and liabilities undertaken at fair value through profit or loss, a potential accounting mismatch is
avoided.
Financial assets and liabilities which are held for trading are measured at fair value through profit or loss. Financial assets and liabilities
are held for trading if they are either acquired in a business model which is characterised by generation of a profit from short-term
fluctuations in price or dealer’s margin, or a pattern of short-term profit taking exists.
Derivative Financial Instruments
In the ordinary course of business, the Group engages as a party to contracts for forward foreign exchange rate, currency and
sometimes interest rate swap instruments and other derivative financial instruments. All derivatives are classified as measured at fair
value through profit or loss.
Subsequent to initial recognition, outstanding forward foreign exchange rate contracts, currency swaps and other derivative financial
instruments are carried in the balance sheet at their fair value. The fair value of these instruments is recognised on the balance sheet
as derivative assets and liabilities.
Gains or losses from changes in the fair value of outstanding forward foreign exchange rate contracts, currency and interest rate
swaps and other derivative financial instruments are recognised in the statement of income as they arise.
k) Sale and repurchase agreements
These agreements are accounted for as financing transactions. Under sale and repurchase agreements, where the Group is the
transferor, assets transferred remain on the Group’s balance sheet and are subject to the Group’s usual accounting policies, with the
purchase price received included as a liability owed to the transferee. Assets in the balance sheet are shown separately from other
assets when the transferee has the right by contract or custom to sell or re-pledge the collateral.
Where the Group is the transferee, the assets are not included in the Group’s balance sheet, but the purchase price paid by it to the
transferor is included as an asset. Interest income or expense arising from outstanding sale and repurchase agreements is recognised
in the statement of income over the term of the agreement.
l) De-recognition of financial assets and liabilities
Financial assets
A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised where:
• the contractual rights to receive cash flows from the financial asset have expired; or
• the Group has transferred its rights to receive cash flows from the asset, or retained the right to receive cash flows from the asset,
but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass-through’ arrangement; and
• the Group either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained
substantially all the risks and rewards of the asset, but has transferred control of the asset.
Collateral (shares and bonds) furnished by the Group under standard repurchase agreements and securities lending and borrowing
transactions is not derecognised because the Group retains substantially all the risks and rewards on the basis of the predetermined
repurchase price, and the criteria for de-recognition are therefore not met.
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Financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of the original liability and
the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.
Debt securities issued and other borrowed funds
The Group recognises financial liabilities on its balance on drawdown.
After an initial measurement, being a fair value minus directly attributable transaction costs, in the case of a financial liability not at fair
value through profit or loss, debt issued, subordinated liabilities and borrowings are measured at amortised cost and any difference
between net proceeds and value at redemption is recognised in the statement of income over the period of borrowing using the
effective interest rate.
m) Fair values of financial assets and liabilities
Fair value is the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date in the principal, or in its absence, the most advantageous market to which the Group
has access at that date. The fair value of a liability reflects its non-performance risk. Where available and reasonably reliable, fair
values are determined by reference to observable market prices. Where representative market prices are not available or are
unreliable, fair values are determined by using valuation techniques which refer to observable market data. These include prices
obtained from independent market surveys, comparisons with similar financial instruments, discounted cash flow analyses and other
valuation techniques commonly accepted and used by market participants.
Future events may cause the assumptions used in arriving at the estimates to change. The effect of any changes in estimates will be
recorded in the financial statements, when determinable. Furthermore, changes and movements in market conditions may affect
accuracy of the fair value calculations so that the actual outcome of a transaction is different from the one reported in the financial
statements. Also, when changed, management estimates used in preparing these financial statements could impact the reported
results of the Group.
n) Leases
Finance leases – Group as lessor
Finance leases, which transfer substantially all the risks and rewards incidental to ownership of the assets, are recognised as assets
at amounts equal at the inception of the lease to the net investment in the lease. The finance income is allocated over time period in-
line with the lease term to produce a constant return on the net investments outstanding in respect of the finance leases. Finance
lease receivables are presented as loans to public.
Operating leases – Group as lessor
The Group presents assets subject to operating leases in the balance sheets according to the nature of the asset. Lease income from
operating leases is recognised in statement of income over the lease term as other income. The aggregate cost of incentives provided
to lessees is recognised as a reduction of rental income over the lease term. Initial direct costs incurred specifically to earn revenues
from an operating lease are added to the carrying amount of the leased asset.
The depreciation policy for depreciable leased assets is consistent with the lessor’s normal depreciation policy for similar assets, and
depreciation is calculated in accordance with accounting policies, used for the Group’s tangible assets.
Group as lessee
A lease is a contract, or a part of a contract, that conveys the right to use asset (the lease asset) for a period of time in exchange for
consideration. For qualifying lease assets, upon lease commencement, a lessee recognises a right-of-use asset and a lease liability.
The right-of-use asset is initially measured at the amount of the lease liability plus any initial direct costs. Subsequently the right-of-
use asset is measured using a cost model. A right-of-use asset is measured at cost less any accumulated depreciation and
impairment. The lease liability is initially measured as a discounted value of payments agreed over the lease term. An incremental
borrowing rate which discounts future payments to estimated present value is applied. The Group presents right-of-use assets in the
same line items in which it presents assets of the same nature that it owns. Lease liabilities are presented within other liabilities. The
Group uses the practical expedient of low-value items where any item generating cash outflows of less than EUR 5 thousand during
the lease term is expensed as incurred with no right-of-use asset or lease liability recognition.
When estimating lease term, the Group’s intentions as well as contractual early termination and extension options of lessee and lessor
are considered. When a previously recognised lease is modified and the scope of the lease increases and the increase in
compensation is commensurate, a new separate lease is recognised. If the increase in compensation is not commensurate or the
scope of the lease decreases the current right-of-use asset and corresponding lease liability is re-measured. In case of a decrease in
scope of the lease a gain or loss (if any) is recognised in the income statement.
For lease contracts with eligible extension or early termination clauses a lease term equal to the planning horizon of three years is
often applied unless the lease term is shorter already. In case of branches this is based on a plan to move towards a more digital
model less dependent on the physical presence. For lease of the headquarters building and certain other lease items a three years
lease term assumption is applied linking this to the business planning horizon of the Group. Incremental borrowing rate, derivate from
the Bank’s deposit rate, but adjusted for additional spread for absence of deposit guarantee for leases, is applied.
When a transfer of an asset by the seller-lessee satisfies the requirements of IFRS 15 to be accounted for as a sale of the asset, the
seller-lessee measures the right-of-use asset arising from the leaseback at the proportion of the previous carrying amount of the asset
that relates to the right of use retained by the seller-lessee. Accordingly, on the day of sale the seller-lessee recognises only the
amount of any gain or loss that relates to the rights transferred to the buyer-lessor. The Group accounts for the deferred sales gain
as a reduction of the right of use asset that would be recognised otherwise, in effect presenting the leaseback right of use asset at the
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before sales carrying value, though applying the most recent expectations when determining lease period. The deferred sales gain is
amortised to income statement over the lease period, but not as a gain, but as a reduction in the right of use depreciation charges.
o) Renegotiated loans and debt forbearances
For economic or legal reasons, the Group might enter into a forbearance agreement with borrowers in financial difficulties in order to
ease the contractual obligation for a limited period of time. By taking into account exposure specifics, an individual approach is
practised. Generally, debt forbearance will take a form of payment deferral to a later time with the amount payable and interest due
re-compensated at a later date. Renegotiated loans are considered non-overdue as long as contractual payments are made on
contractually due dates. When the terms of a financial asset are renegotiated or modified a de-recognition assessment is made. When
modifications result in de-recognition of the existing financial asset, then the estimated fair value of the asset is treated as cash inflow
from the existing financial asset and a new contract is recognised at fair value plus any eligible transaction costs. When modification
results in de-recognition, a new loan is recognised and allocated to Stage 1, if not credit-impaired at that time. When modification or
renegotiation of contractual cash flows of a financial asset does not result in de-recognition of financial asset, the Group recalculate
the gross carrying amount of the financial asset and recognise a modification gain or loss in profit or loss. For discounting expected
future cash flows the financial asset’s original effective interest rate or credit-adjusted effective interest rate for purchased or originated
credit-impaired financial assets is applied.
p) Impairment of loans to public and provisions for loan commitments, guarantees and letters of credit
The economic conditions of the markets the Group operates in may have an impact on the borrowers’ ability to repay their debts. The
Management of the Group considers both specific exposures and portfolio-level risks in determining the balance of impairment
allowance for expected credit losses. The expected credit loss assessment is forward-looking and is based on unbiased and
probability-weighted information about past events, current conditions and forecasts of future economic conditions. Impairment
allowance for expected credit losses is recognised even if no credit loss event has happened. A loan or portfolio of loans to public is
impaired and impairment losses are incurred if, and only if, there is objective evidence that the estimated present value of future cash
flows is less than the current carrying value of the loan or portfolio of loans to public, and it can be reliably estimated.
Loss allowances for expected credit losses on loan commitments and financial guarantee contracts are recognised as provisions. The
provisioning principles for expected losses arising from off-balance sheet financial commitments and contingent liabilities are
consistent with the principles and methods applied for on-balance sheet exposures. Additional considerations are applied to
adjustments for expected conversion and future use patterns of the committed limits and the Group’s performance in timely
identification and termination of limits for deteriorating exposures.
Expected credit losses are recognised based on the stage in which the exposure is allocated at the reporting date. 12-month expected
credit losses are recognised for Stage 1 exposures, where credit risk has not increased since initial recognition. Lifetime expected
credit losses are recognised for Stage 2 exposures whose credit risk has increased significantly since initial recognition and for Stage
3 exposures which are credit impaired. Days past due is one of the main quantitative indicators used to assess the ‘significant increase
in credit risk’ (proxy for transferring exposures from Stage 1 to Stage 2) augmented by other additional risk factors (e.g. internal credit
rating grade, forbearance, breach of financial covenants). Significant increase in credit risk in comparison to the initial credit risk is the
criteria for transfer to Stage 2. The ‘default’ is defined in line with the prudential definition of the default: exposure delayed for certain
amount of days or more, exposure is individually impaired, significant forbearance and other unlikeliness to pay indicators. The ‘default’
is the criteria for a transfer to Stage 3. Exposure is no longer considered to have significantly increased credit risk (transfer from Stage
2 to Stage 1) or default (transfer from Stage 3 to Stage 2) when specific time period has passed (in some instances up to 2 years)
from the moment when all increased risk of default factors are no longer observed. Significant forbearance measures are within risk
factors for which an extended monitoring period applies. The length of the monitoring period is proportionate to the significance of the
risk factor observed and forbearance measures undertaken. The models are calibrated for transfer of exposures to lower stage to
happen only when a significant reduction in the risk of non-performance has been observed beforehand. In the reporting period a
number of improvements in expected credit loss calculation methodology were introduced. Merton-Vasicek framework in
macroeconomic model that estimates changes in PDs was adopted, improvements in identification of significant increase in credit risk
since initial recognition were implemented, changes in staging algorithm related to forbearance cases were applied and other smaller
improvements introduced.
The Group first assesses whether objective evidence of impairment exists individually for loans to public that are individually
significant, and individually or collectively for loans that are not individually significant. If the Group determines that no objective
evidence of impairment exists for an individually assessed loan, whether significant or not, it includes that loan in a group of loans
with similar credit risk characteristics and collectively assesses them for impairment. As soon as information is available that
specifically identifies losses on individually impaired loans included in a group of loans with similar credit risk characteristics, those
loans are removed from the group. Assets that are individually assessed for impairment and for which an impairment loss is or
continues to be recognised are not included in a collective assessment of impairment.
For collective measurement of expected credit losses, the Group has selected to use EAD x PD x LGD approach, where EAD stands
for exposure at default, PD – probability of default, and LGD – loss given default. To estimate probability weighted cash flows, the
Group uses single scenario expected cash flow method with overlays for alternative scenarios for macroeconomic factors. The major
macroeconomic factors considered are unemployment rate, average monthly wage, year-on-year change in inflation rate, real gross
domestic product and real estate prices. PDs and LGDs are derived from historic performance of the loans to public. ‘Point in time’
probabilities (probability of default in the current economic conditions, as opposed to economic cycle-neutral ‘through the cycle’
probabilities of default as often used for regulatory purposes) are used for PDs. Correspondingly, estimated PDs are expected to
change through the economic cycle. For measurement of expected credit loses financial instruments are grouped on the basis of
shared credit risk characteristics. The grouping considers distinct characteristics in industry, product type, collateral type and
geographical location of the borrower.
A loan is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial
asset have occurred. Evidence that a loan is credit-impaired includes observable data about the following events:
• significant financial difficulty of the borrower;
• a breach of contract, such as a default or delinquency in interest or principal payments, persistent and major covenant
noncompliance;
• granting to the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, a material concession
that the lender would not otherwise consider;
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• the borrower entering bankruptcy or other financial reorganisation becomes highly probable;
• the purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses;
• a combination of several other events that cause a loan to become credit-impaired.
For a loan that is credit-impaired at the reporting date, but that is not a purchased or originated credit-impaired financial asset, the
expected credit losses are measured as the difference between the loan’s gross carrying amount and the present value of estimated
future cash flows discounted at the loan’s original effective interest rate. Any adjustment is recognised as an impairment gain or loss.
The assessment of whether lifetime expected credit losses should be recognised is based on significant increases in the likelihood
(Stage 2) or risk of a default (Stage 3) occurring since initial recognition instead of on evidence of a financial asset being credit-
impaired at the reporting date or an actual default occurring. In most cases, there will be a significant increase in credit risk before a
financial asset becomes credit-impaired or an actual default occurs (Stage 3), thus default (Stage 3) and credit-impaired loan
classification will be closely aligned and will indicate non-performance of the borrower or significance of forbearance measures
undertaken, but classification will not necessarily equal in all cases.
For loans to public, the amount of impairment loss is measured as the difference between the loan’s carrying amount and the present
value of estimated future cash flows discounted at the loan’s original effective interest rate. If a loan has a variable interest rate, the
discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. The calculation
of the present value of the estimated future cash flows of a collateralised loan reflects the cash flows that may result from foreclosure
less costs for obtaining and selling the collateral, whether or not foreclosure is probable. The amount of the loss is recognised in the
statement of income.
If, in a subsequent period, the amount of the impairment loss decreases, the previously recognised impairment loss is reversed. Any
subsequent reversal of the impairment loss is recognised in the statement of income, to the extent that the carrying value of the loan
does not exceed what its amortised cost would have been absent the impairment at the reversal date.
For purchased or originated credit-impaired financial assets, expected credit losses are discounted using the credit-adjusted effective
interest rate determined at initial recognition. For purchased or originated credit-impaired financial assets only the cumulative changes
in lifetime expected credit losses since initial recognition are recognised as a loss allowance. Favourable changes in lifetime expected
credit losses are recognised as an impairment gain, even if the lifetime expected credit losses are less than the amount of expected
credit losses that were included in the estimated cash flows on initial recognition.
Fully impaired loans to public, recovery of which may become economically unviable, may be written-off and charged against
impairment allowance. They are not written-off until the necessary legal procedures have been completed and the amount of the loss
is determined. When a loan or receivable is written-off, the claim against the borrower normally is not forgiven. Subsequent recoveries
of amounts previously written-off are reported in the statement of income as recovered written-off assets within net credit losses on
financial instruments. For certain products of the retail loan book the write-off decision is automated trigger based. For corporate loan
book an individual analysis is the basis for write-off decision of unrecoverable credit impaired exposures.
q) Impairment of debt securities and loans to credit institutions and central banks
Similarly, as for loans to public, the Group estimates expected credit losses to reflect changes in credit risk since initial recognition of
debt securities, loans to credit institutions and central banks exposures and commitments to extend credit. Impairment provisioning
requirements apply to financial assets at amortised cost, but do not apply to financial assets measured at fair value through profit or
loss. For financial assets measured at fair value through other comprehensive income, the loss allowance is recognised in other
comprehensive income and does not reduce the carrying amount in the balance sheet.
Impairment allowances are recognised based on forward looking information, even if no credit loss event has happened. The
assessment considers broad range of information, but as most of these types of exposures are rated, it relies heavily on external
credit ratings and rating agencies’ reported default rates derived by calculating multi-period rating transition matrices. If unavailable
for evaluation purposes, external credit ratings may be substituted by internally calculated credit quality levels. Credit risk triggers
(event of insolvency, any delay of payments, restructuring of debt) and individual credit risk analysis of the issuer are also considered.
The Group deems investment grade rated exposures as low credit risk, thus these are assumed no to have experienced a significant
increase in credit risk. For non-investment grade exposures decrease in external credit rating by more than 3 notches since acquisition
is deemed significant increase in credit risk. Expected credit losses are recognised based on the stage in which the exposure is
allocated at the reporting date. 12-month expected credit losses are recognised for Stage 1 exposures, where credit risk since initial
recognition has not increased significantly. Lifetime expected credit losses are recognised for Stage 2 exposures whose credit risk
has increased significantly since initial recognition and Stage 3 exposures which are credit impaired. Stage 3 exposures, if any were
identified, would additionally be subjected to comprehensive evaluation, including comparison to market valuations for similar
exposures, analysis of market depth of the respective security, past trading performance and all other available information.
r) Tangible assets
Property and equipment initially is measured at acquisition cost or creation cost. After initial measurement property and equipment is
carried at cost less any accumulated depreciation and any accumulated impairment losses. Property and equipment is periodically
reviewed for impairment according to principles described in the paragraph w) Impairment of non-financial assets. If the recoverable
value of an asset is lower than its carrying amount, the asset is written down to its recoverable amount.
Depreciation is calculated using straight-line method based on the estimated useful life of the asset. The following depreciation rates
have been applied:
Category
Annual depreciation rate
Buildings
1% - 10%
Transport vehicles
14% - 20%
Other
14% - 33%
Leasehold improvements are capitalised and depreciated over the remaining lease contract period on a straight-line basis. Land and
assets under construction are not depreciated.
Certain reconstruction and renovation costs of buildings, which improve their quality and performance, are capitalised and amortised
over the estimated useful life on a straight-line basis. Maintenance and repair costs are charged to the statement of income as incurred.
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s) Intangible assets
Intangible assets comprise software, both purchased and internally generated. Separately acquired intangible assets are measured
at cost. The cost of separately acquired intangible assets also comprises directly attributable costs of preparing the asset for its
intended use. These include payroll and professional fees arising directly from bringing the asset to its working condition and costs of
testing whether the asset is functioning properly. The cost of separately acquired intangible assets doesn’t include future payments
of variable fees which are dependent on achievement of key performance indicators. Variable fees are capitalised into the cost of
intangible asset when relevant key performance indicators are achieved and fees become payable and amortised over the estimated
remaining useful life on a straight-line basis.
The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition.
Subsequent to the initial recognition, intangible assets are carried at cost less accumulated amortisation and any accumulated
impairment loss. Annual amortisation rates applied on a straight-line basis to software and other intangible assets range from 10% to
33%. All intangible assets, except for goodwill, are with definite lives.
t) Inventories
From time to time the Group repossesses from its customers certain assets serving as collateral, when the customer cannot otherwise
meet his payment obligations and other loan work-out measures have been unsuccessful. Such repossessed assets which are
expected to be sold in the ordinary course of business and are not held for capital appreciation or rental income are classified as
inventories. Inventories mainly encompass real estate purchased and held for sale in near future by the Group’s real estate workout
companies.
Group’s inventories are accounted at individual cost. The costs of inventories comprise all costs of purchase, costs of conversion and
other costs incurred in bringing the inventories to their present condition. Inventories are held at the lower of purchase cost or net
realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of
completion and the estimated costs necessary to make the sale. The amount of write-down of inventories to net realisable value is
recognised as expense in the period the write-down occurs. When inventories are sold, the carrying amount of those inventories is
recognised as an expense in the period in which the related revenue is recognised.
u) Non-current assets held for sale
The Group classifies non-current assets as held for sale if their carrying amount is to be recovered through a sale transaction rather
than continuing use and the management has committed to an active plan that is expected to result in a complete sale within one year
from the date of classification.
Non-current assets classified as held for sale also include assets of a class that an entity would normally regard as non-current that
are acquired exclusively with a view to resell in the near term but are not expected to be sold in the ordinary course of business.
Assets classified as held for sale are stated at the lower of their carrying amount and fair value less costs to sell of the non-current
asset. At least at each reporting date, the Group assesses, whether the value of the non-current assets classified as held for sale is
impaired. The impairment loss reduces carrying amount of the asset and is included in the statement of income’s line ‘Other
impairment losses’. In the same line of the statement of income a gain from any subsequent increase in fair value less cost to sell of
an asset is recognised, but not in excess of the cumulative impairment loss that has been recognised either for non-current asset held
for sale or previously for the non-current asset.
v) Investment properties
Properties that are held for long-term rental yields or for capital appreciation or both, and that are not occupied by the Group are
classified as investment properties. The Group initially measures investment properties at cost, including transaction costs.
For subsequent measurements the Group has opted for a cost model which requires an investment property to be measured at
depreciated cost. Depreciation is calculated using the straight-line method based on the estimated useful life of the respective asset.
Depreciation method and rates as for Group’s property and equipment are applicable. Investment properties are periodically reviewed
for impairment.
If the recoverable value of an asset is lower than its carrying amount, the respective asset is written down to its recoverable amount.
Any subsequent reversal of the impairment loss is recognised in the statement of income, to the extent that the carrying amount of an
asset does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset
in prior periods
w) Impairment of non-financial assets
At each reporting date, the Group reviews the carrying amounts of its non-financial assets (e.g. inventories and deferred tax assets)
to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is
estimated.
For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use
that are largely independent of the cash inflows of other assets or cost generating units (CGUs).
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based
on the estimated future cash flows. Discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset or CGU.
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount. Impairment losses are
recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to
reduce the carrying amounts of the other assets in the CGU on a pro rata basis.
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An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the
asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation,
if no impairment loss had been recognised.
x) Insurance business
The Group’s exposure to insurance relates to life insurance contracts. Life insurance contracts may contain both financial and
insurance risk. The part of contracts that do not contain significant insurance risk is accounted as investment contracts. The
corresponding liability to clients is shown within deposits and borrowings from customers. Insurance reserves are shown as other
liabilities. The Group monitors the underlying assumptions in the calculations of insurance related risks regularly and seeks risk
mitigation measures such as reinsurance if the Group deems this appropriate.
An insurance contract is a contract in which the insurer assumes a significant insurance risk from the policyholder, the insurer agrees
to indemnify the policyholder for losses in the event of an insured uncertain event specified in the contract, such as the death of the
insured person. The Policyholder undertakes to pay insurance premiums in the scope, terms and amount specified in the insurance
contract, as well as to fulfil other obligations specified in the insurance contract.
Insurance reserves for annuity pension products are recognized when the premium is received in the amount of estimated future
annuity claims and related expense. The estimated contractual future cash flows from for annuity pension products (taking into
consideration assumptions about mortality, service costs and investment income) are discounted as per methodology specified by the
FCMC. Any re-estimation gain or loss in insurance reserves is recognized in income statement as Net insurance result within Net
other income.
y) Off-balance sheet financial commitments and contingent liabilities
In the ordinary course of business, the Group extends off-balance sheet financial commitments and contingent liabilities comprising
commitments to issue loans to public, commitments for unutilised credit lines and credit card limits, as well as financial guarantees
and commercial letters of credit.
Off-balance sheet commitments are recognised when the Group commits the limit to the client. Financial guarantees and letters of
credit are recognised as contingent off-balance sheet liabilities when the Group is exposed to risk under the contract. Off-balance
sheet items are recognised on-balance sheet on drawdown of commitment or for guarantees and letters of credit, when these in rare
cases become payable by the Group. Commitments generally have fixed expiration dates, or other termination clauses; in some
cases, the Group may terminate these unilaterally. Since commitments may expire without being drawn down, the total committed
amounts do not necessarily represent certain future cash outflows.
On initial recognition financial guarantee contracts are measured at fair value. Subsequently, they are carried at the higher of the
amount initially recognised less cumulative amortisation over the life of the guarantee and the amount determined in accordance with
the accounting policy for provisions when enforcement of the guarantee has become probable.
The methodology for provisioning against possible losses arising from off-balance sheet financial commitments and contingent
liabilities is consistent with that described in the paragraph z).
z) Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that
an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount
of the obligation can be made.
Loss allowance for expected credit losses on loan commitments and financial guarantee contracts is recognised as provisions. For
details on methodology of calculation, refer to section p) of the Note 3 (Impairment of loans to public and provisions for loan
commitments, guarantees and letters of credit). In addition to considerations applicable to on-balance exposures, for expected credit
loss assessment of off-balance sheet commitments a conversion and expected future use patterns, the Group’s reaction time in
identifying deteriorating exposures and a realistic past performance on timely termination of these limits is considered.
aa) Asset management
Funds managed by the Group on behalf of individuals, corporate customers, trusts and other institutions are not regarded as assets
of the Group and, therefore, are not separately included in the balance sheet. Funds under management are presented in financial
statements only for disclosure purposes. Commission for asset management is recognised on accrual basis and generally is
dependent on the volume of assets managed.
bb) Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents are defined as the amounts comprising
cash and demand balances with central banks and other credit institutions with an insignificant risk of changes in value, less demand
deposits due to credit institutions and central banks.
cc) Offsetting of assets and liabilities
Financial assets and liabilities are offset, and the net amount is reported in the balance sheet when there is a currently enforceable
legal right to set off the recognised amounts and there is an intention to settle on a net basis, or to realize the asset and settle the
liability simultaneously.
dd) Events after the reporting date
Post-period-end events that provide additional information about the Group’s position at the reporting date (adjusting events) are
reflected in the financial statements. Post-period-end events that are not adjusting events are disclosed in the notes if material.
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ee) Use of estimates and judgements in the preparation of financial statements
The preparation of financial statements in conformity with International Financial Reporting Standards as adopted by EU, requires
management to make estimates and judgements that affect the reported amounts of assets, liabilities, income and expenses and
disclosure of contingencies. The management has applied reasonable and prudent estimates and judgments in preparing these
financial statements. Significant areas of estimation used in the preparation of the accompanying financial statements relate to
evaluation of impairment losses for assets, determination of the control of investees for consolidation purposes, evaluation of
recognisable amounts of deferred tax assets and liabilities, determination of time when control over UniCredit leasing was obtained
and presentation of Kaleido Privatbank AG as discontinued operations held for sale.
Impairment of loans to public
The Group regularly reviews its loans to public for assessment of impairment. The estimation of impairment losses is inherently
uncertain and dependent upon many factors. Two distinct approaches are applied for expected credit loss estimation – individual
evaluation, mostly applied to large exposures, and collectively estimated expected credit losses for homogeneous groups of smaller
exposures.
On an on-going basis expected credit losses are identified promptly as a result of large loan exposures being individually monitored.
For these loan exposures expected credit losses are calculated on an individual basis with reference to expected future cash flows
including those arising from the sale of collateral. The Group uses its experienced judgement to estimate the amount of any expected
credit loses considering future economic conditions and the resulting trading performance of the borrower and the value of collateral.
As a result, the individually assessed expected credit losses can be subject to variation as time progresses and the circumstances
change or new information becomes available. The methodology and assumptions used for estimating both the amount and timing of
future cash flows are reviewed regularly to reduce any differences between expected credit loss estimates and actual credit loss
experience.
Changes in net present value of estimated future cash flows by +/-5% for loans to public for which expected credit losses are
individually assessed would result in EUR +/-0.23 million change in impairment allowance for the Bank (2020: EUR +/-0.05 million)
and EUR +/-0.79 million for the Group (2020: EUR +/-0.05 million). Change in estimated value of collateral by +/-5% for loans to public
for which expected credit losses are individually assessed would result in EUR +/-0.92 million change in impairment allowance for the
Bank (2020: EUR +/-0.44 million) and EUR +/-1.30 million for the Group (2020: EUR +/-0.44 million).
For majority of the loans to public the Group collectively estimates impairment allowance to cover expected losses inherent in the loan
portfolio. The collective impairment assessment is based on observable data derived from historic and applied to current loans to
clients with similar credit risk characteristics. For this assessment loans to clients are segmented into homogeneous groups based on
product type (mortgage, consumer loan etc.) and customer type (private individual, legal entity, public entity etc.). Historical loss
experience is adjusted for current observable market data using the Group’s experienced judgement to reflect the effects of current
conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the
historical period that do not exist currently. The major parameters of the collectively estimates expected credit loss calculation
methodology are PD, LGD, EAD and staging outcome. The model also incorporates forward-looking macroeconomic information to
arrive to point in time instead of over the cycle expected credit loss estimates. The future credit quality of the loan portfolio for which
the expected credit losses are estimated collective is subject to uncertainties that could cause actual credit losses to differ from
expected credit losses. These uncertainties include factors such as international and local economic conditions, borrower specific
factors, industry and market trends, interest rates, unemployment rates and other external factors.
In 2021 the management continued to recognize a significant uncertainty regarding duration and severity of Covid-19 situation and
associated possible disruptions to the Baltic economies and customers of the Group. Consequently, a prudent impairment overlay for
Stage 1 customer loan exposures was kept in ECL framework. The impairment overlay represents an additional loss reserve over the
modelled ECL amounts to account for other economic uncertainties. It addresses increased uncertainty regarding the forward-looking
economic conditions in the current Covid-19 situation. Such future uncertainties which point in time ECL models calibrated on historical
data, despite being adjusted with forward looking information, might not be fully capturing in the current unusual environment. As of
31 December 2021, impairment overlay of EUR 1.4 million for the Bank and EUR 5.2 million for the Group has been recognised to
address these modelling uncertainties (2020: EUR 3.2 million for the Bank and EUR 4.1 million for the Group).
Changes in all applied LGD rates by 500 basis points would result in change in collectively estimated impairment allowance and
provisions by EUR +4.4/-4.6 million for the Bank and EUR +7.3/-7.6 million for the Group (2020: EUR +3.1/-3.1 million for the Bank
and EUR +3.6/-3.6 million for the Group). Changes in the PD rates for not overdue category by 100 basis points would result in change
in collectively estimated impairment allowance by EUR +4.6/-4.6 million for the Bank and EUR +6.4/-6.4 million for the Group (2020:
EUR +3.5/-3.4 million for the Bank and EUR +3.9/-3.5 million for the Group) and provisions for off-balance sheet commitments and
guarantees by EUR +0.6/-0.6 million for the Bank and EUR +0.7/-0.7 million for the Group (2020: EUR +0.3/-0.3 million for the Bank
and EUR +0.3/-0.3 million for the Group).
The Group has implemented forward-looking information in the measurement of expected credit losses. The forward-looking
adjustment incorporates two economic scenarios with distinct economic consequences: a base case scenario which comprises most
likely future economic development and a less likely adverse scenario. The GDP annual growth rates, which are derived from a
combination of internal and external macroeconomic forecasts, are one of the key variables. The key variables are summarized below.
Base case scenario
Adverse scenario
2022
2023
2022
2023
Latvia
GDP (annual change)
4.0%
3.4%
0.9%
3.4%
Unemployment rate
6.8%
6.2%
8.4%
7.8%
Inflation (annual change)
5.3%
2.3%
5.9%
2.7%
Average gross wage (annual change)
4.9%
5.4%
2.1%
4.2%
Real estate prices (annual change)
6.5%
5.6%
1.6%
4.1%
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 32
Base case scenario
Adverse scenario
2022
2023
2022
2023
Lithuania
GDP (annual change)
4.0%
3.4%
0.5%
3.4%
Unemployment rate
7.0%
6.8%
8.6%
8.4%
Inflation (annual change)
5.9%
2.3%
6.5%
2.6%
Average gross wage (annual change)
5.3%
4.5%
2.8%
3.3%
Real estate prices (annual change)
5.7%
4.5%
1.7%
3.8%
Estonia
GDP (annual change)
4.3%
3.8%
0.8%
3.8%
Unemployment rate
5.8%
5.1%
7.4%
6.7%
Inflation (annual change)
5.9%
2.3%
6.5%
2.7%
Average gross wage (annual change)
4.1%
4.3%
1.9%
3.2%
Real estate prices (annual change)
4.6%
3.8%
0.4%
2.9%
The current implementation, based on an expert judgement, weights base case scenario with 60% likelihood and the adverse scenario
at 40% likelihood (2020: 55% vs. 45%). The 60% vs. 40% weighted augmented scenario is used for forward-looking adjustment. If
the weighting of the adverse scenario was to increase to 45%, the expected credit loss allowance of the Bank would increase by EUR
1.2 million and for the Group by EUR 1.8 million as of 31 December 2021. If the weighting of the base case scenario was to increase
to 100%, the expected credit loss allowance of the Bank would decrease by EUR 9.1 million and for the Group by EUR 13.7 million
as of 31 December 2021. As of 31 December 2020, the weighting of base case and adverse scenarios was 55% vs. 45%. If the
weighting of the adverse scenario was to increase to 50%, the expected credit loss allowance of the Bank would increase by EUR 0.6
million and for the Group by EUR 0.6 million as of 31 December 2020. If the weighting of the base case scenario was to increase to
100%, the expected credit loss allowance of the Bank would decrease by EUR 5.4 million and for the Group by EUR 5.9 million as of
31 December 2020. Sensitivities as of 31 December 2020 do not include impact from EUR 0.9 billion loan portfolio of SIA UniCredit
Leasing (now SIA Citadele Leasing) acquired in 2021.
Impairment of other assets
The Bank and the Group at the end of each reporting period assesses whether there is any indication that a non-financial asset may
be impaired other than inventory and deferred tax. If any such indication exists, the recoverable amount of the particular asset or cash
generating unit is estimate. Recoverable amount estimates depend on uncertainties in future free cash flow estimates and discount
rates applied. For more details on the approach and key assumptions in recoverable amount estimates of the Bank’s investments in
subsidiaries refer to Note 19 (Investments in Related Entities).
Consolidation group
The Group consolidates all entities where it controls the investee. The Group controls an investee when it is exposed, or has rights,
to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
For list of investees included in the consolidation group refer to Note 19 (Investments in Related Entities). For investments in securities
which are not consolidated refer to Note 18 (Equity and Other Financial Instruments).
In the ordinary course of business IPAS CBL Asset Management provides management services to several funds where its interest
held is only fees from servicing. The Bank has made an investment solely with a view to diversify its securities portfolio also in funds
managed by IPAS CBL Asset Management. According to the prospectus of the funds, the investment decisions are made collectively
by IPAS CBL Asset Management Investment Committee. The Bank has no intention to participate in decision making regarding the
asset allocation of any of the funds. Moreover, interfering with Investment Committee's decision-making process would be against the
corporate governance principles maintained by that Bank since its inception. As such, the Bank believes it does not have the control
over the funds, as per IFRS 10, and the funds should not be consolidated.
Deferred tax assets and liabilities
The future taxable profits and the amount of tax benefits that are probable in the future are based on a medium term financial forecast
prepared by management and extrapolated results thereafter. The aforementioned forecasts indicate that the Bank will have sufficient
taxable profits in the future periods to realise the recognised deferred tax asset. For more details refer to Note 13 (Taxation).
Date when control over UniCredit leasing was obtained
In 2019 AS Citadele banka entered into a binding agreement with UniCredit S.p.A. to acquire UniCredit’s Baltic leasing operations
through the acquisition of 100% of the shares in SIA UniCredit Leasing. The acquisition transaction was closed after the reporting
date, with Citadele obtaining full control from the beginning of January 2021. To conclude on the date when the control was obtained
an analysis of the management and governance framework in the context of the sale-purchase agreement and general legislative
setup was performed. After completion of the acquisition transaction in 2021, the acquired entity was renamed to SIA Citadele Leasing.
Presentation of Kaleido Privatbank AG as discontinued operations held for sale
Subsequent to the period end Citadele has agreed to sell its Swiss subsidiary Kaleido Privatbank AG. The specific set of conditions
which indicates that the investment will be recovered principally through a sale transaction rather than through continuing use was not
present as of the period end. Consequently, operations of Kaleido Privatbank AG are not presented as discontinued operations as of
period end, based on no strong commitment for sales of these operations either from Management Board or from Supervisory Board
in 2021. Refer to Note 34 (Events after the Reporting Date) for more details on the sale.
NOTE 4. OPERATING SEGMENTS
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
The chief operating decision maker is the person or the group that allocates resources to and assesses the performance of the
operating segments of the Group. The Management Board of the Bank is the chief operating decision maker.
All transactions between operating segments are on an arm’s length basis. Funds Transfer Pricing (FTP) adjusted net interest income
of each operating segment is calculated by applying internal transfer rates to the assets and the liabilities of the segment. Maturity,
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 33
currency and timing of the transaction are components of the internal transfer rate calculation. Income and expense are reported in
the segment by originating unit and at estimated fair price. Both direct and indirect expenses are allocated to the business segments,
including overheads and non-recurring items. The indirect expense from internal services is charged to the internal consumers of the
service and credited to provider of the service. The internal services are charged at estimated fair price or at full cost.
The comparative information as of 31 December 2020 and for the year ended 31 December 2020 have been restated for comparability
by applying the most recent segmentation methodology. Changes mostly relate to redistribution of previously separately reported
exposures originated by SIA Citadele Factoring, UAB Citadele Factoring and OU Citadele Factoring into Private customers, SME,
Corporate and Wealth segments.
Main business segments of the Group are:
Private customers
Private individuals serviced in Latvia, Lithuania and Estonia. Operations of the segment include full banking and advisory services
provided through branches, internet bank and mobile banking application.
SME
Small and medium-sized companies in Latvia, Lithuania and Estonia serviced through branches, internet bank and mobile banking
application.
Corporate
Large customers serviced in Latvia, Lithuania and Estonia. Yearly turnover of the customer is above EUR 7 million or total risk
exposure with Citadele Group is above EUR 2 million or the customer needs complex financing solutions.
Wealth management
Private banking, advisory, investment and wealth management services provided to clients serviced in Latvia, Lithuania and Estonia.
This segment includes operations of IPAS CBL Asset Management, AS CBL Atklātais Pensiju Fonds and AAS CBL Life.
Swiss
This segment comprises operations of Kaleido Privatbank AG. On 1 April 2021 the legal name of the Swiss registered banking
subsidiary AP Anlage & Privatbank AG was changed to Kaleido Privatbank AG. Subsequent to the period end, Citadele has agreed
to sell its Swiss subsidiary. Refer to Note 34 (Events after the Reporting Date).
Leasing
Leasing services provided to private individuals and companies in Latvia, Lithuania and Estonia by SIA Citadele Leasing.
Other
Group’s treasury functions and other business support functions, including results of the subsidiaries of the Group operating in non-
financial sector.
Segments of the Group
Group 2021, EUR thousands
Reportable segments
Other
Private
customers
SME
Corporate
Wealth
Swiss
Leasing
Total
Interest income
36,655
14,569
27,902
1,813
1,336
36,850
4,849
123,974
Interest expense
(1,089)
(19)
(293)
(983)
(232)
(712)
(12,562)
(15,890)
Net interest income
35,566
14,550
27,609
830
1,104
36,138
(7,713)
108,084
Fee and commission income
17,955
12,190
11,766
13,314
2,671
946
1,813
60,655
Fee and commission expense
(11,279)
(4,346)
(6,131)
(1,640)
(357)
(29)
(416)
(24,198)
Net fee and commission
income
6,676
7,844
5,635
11,674
2,314
917
1,397
36,457
Net financial income
810
2,213
1,530
1,191
532
2
1,041
7,319
Net other income
(1,458)
54
1,580
873
17
168
609
1,843
Operating income
41,594
24,661
36,354
14,568
3,967
37,225
(4,666)
153,703
Net funding allocation
(787)
(193)
(979)
517
50
(2,145)
3,537
-
FTP adjusted operating income
40,807
24,468
35,375
15,085
4,017
35,080
(1,129)
153,703
Net credit losses
(7,010)
(743)
(3,232)
(18)
(195)
7,924
1,661
(1,613)
Net result before operating
expense
33,797
23,725
32,143
15,067
3,822
43,004
532
152,090
Not allocated income and
expense, net
(97,045)
Net profit / (loss)
55,045
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 34
Group 2020, EUR thousands (Reclassified for comparability)
Reportable segments
Other
Private
customers
SME
Corporate
Wealth
Swiss
Leasing
Total
Interest income
38,762
15,690
25,591
2,372
2,716
-
4,993
90,124
Interest expense
(2,003)
(51)
(625)
(2,961)
(482)
-
(16,462)
(22,584)
Net interest income
36,759
15,639
24,966
(589)
2,234
-
(11,469)
67,540
Fee and commission income
14,004
10,277
8,880
12,648
3,153
-
2,799
51,761
Fee and commission expense
(8,412)
(3,796)
(5,056)
(1,583)
(429)
-
(2,304)
(21,580)
Net fee and commission
income
5,592
6,481
3,824
11,065
2,724
-
495
30,181
Net financial income
674
1,267
494
1,710
(379)
-
(21,229)
(17,463)
Net other income
(1,437)
(385)
(459)
(450)
(529)
-
17,669
14,409
Operating income
41,588
23,002
28,825
11,736
4,050
-
(14,534)
94,667
Net funding allocation
(1,764)
(635)
(2,783)
318
392
-
4,472
-
FTP adjusted operating income
39,824
22,367
26,042
12,054
4,442
-
(10,062)
94,667
Net credit losses
(282)
(782)
(400)
(5,070)
40
-
(2,857)
(9,351)
Net result before operating
expense
39,542
21,585
25,642
6,984
4,482
-
(12,919)
85,316
Not allocated income and
expense, net
(81,708)
Net profit / (loss)
3,608
Group as of 31/12/2021, EUR thousands
Reportable segments
Private
customers
SME
Corporate
Wealth
Swiss
Leasing
Other
Total
Assets
Cash, balances at central banks
-
-
-
-
9,399
-
361,626
371,025
Loans to credit institutions
-
-
-
3,201
19,427
421
35,693
58,742
Debt securities
-
-
49,547
48,445
100,968
-
1,602,760
1,801,720
Loans to public
843,916
253,413
668,653
41,607
6,500
870,373
17,047
2,701,509
Equity instruments
-
-
-
-
-
-
1,279
1,279
Other financial instruments
-
-
-
34,632
-
-
7,400
42,032
All other assets
-
-
1,953
6,799
2,410
14,282
52,810
78,254
Total segmented assets
843,916
253,413
720,153
134,684
138,704
885,076
2,078,615
5,054,561
Liabilities
Deposits from banks
-
-
-
-
-
-
479,235
479,235
Deposits from customers
1,466,577
628,860
962,744
598,214
139,598
-
17,870
3,813,863
Debt securities issued
-
-
-
-
-
-
258,895
258,895
All other liabilities
-
-
125
44,969
3,992
24,830
31,577
105,493
Total segmented liabilities
1,466,577
628,860
962,869
643,183
143,590
24,830
787,577
4,657,486
Group as of 31/12/2020, EUR thousands (Reclassified for comparability)
Reportable segments
Private
customers
SME
Corporate
Wealth
Swiss
Leasing
Other
Total
Assets
Cash, balances at central banks
-
-
-
-
15,598
-
1,131,008
1,146,606
Loans to credit institutions
-
-
-
2,702
8,296
-
40,289
51,287
Debt securities
-
-
10,415
38,766
157,749
-
1,553,260
1,760,190
Loans to public
635,448
268,344
578,021
39,431
6,711
-
13,268
1,541,223
Equity instruments
-
-
-
-
-
-
4,764
4,764
Other financial instruments
-
-
-
29,509
-
-
13,834
43,343
All other assets
-
-
7
5,090
544
-
44,264
49,905
Total segmented assets
635,448
268,344
588,443
115,498
188,898
-
2,800,687
4,597,318
Liabilities
Deposits from banks
-
-
-
-
-
-
449,991
449,991
Deposits from customers
1,285,217
492,840
826,638
705,140
184,951
-
176,604
3,671,390
Debt securities issued
-
-
-
-
-
-
60,080
60,080
All other liabilities
13
121
36,633
2,398
-
32,382
71,547
Total segmented liabilities
1,285,217
492,853
826,759
741,773
187,349
-
719,057
4,253,008
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 35
NOTE 5. INTEREST INCOME AND EXPENSE
EUR thousands
2021
2020
2021
2020
Group
Group
Bank
Bank
Interest income calculated using the effective interest method:
Financial instruments at amortised cost:
Loans to public
69,282
71,985
86,064
75,582
Debt securities
3,243
2,977
2,996
2,586
Cash balances at and lending to/from central banks
and credit institutions (including TLTRO-III)
3,081
1,462
3,090
1,464
Deposits from public at negative interest rates
861
242
466
242
Debt securities at fair value through other comprehensive
income
1,555
3,264
842
1,270
Interest income on finance leases (part of loans to public)
45,952
10,194
-
-
Total interest income
123,974
90,124
93,458
81,144
Interest expense on:
Financial instruments at amortised cost:
Deposits and borrowing from public
(8,978)
(13,259)
(8,130)
(12,889)
Debt securities issued
(3,952)
(3,637)
(3,952)
(3,637)
Deposits from credit institutions and central banks
(104)
(242)
(276)
(675)
Deposits to central banks and other assets at negative
interest rates
(923)
(3,749)
(862)
(3,661)
Financial liabilities at fair value through profit or loss
Deposits and borrowing from public
(145)
(129)
-
-
Lease liabilities
(64)
(41)
(50)
(94)
Other interest expense
(1,724)
(1,527)
(1,724)
(1,528)
Total interest expense
(15,890)
(22,584)
(14,994)
(22,484)
Net interest income
108,084
67,540
78,464
58,660
Effective interest rate on high-quality liquid assets is negative in certain central bank, central government and credit institution
exposures. As the interest resulting from a negative effective interest rate on financial assets reflects an outflow of economic benefits,
this is presented as interest expense. Similarly, an inflow of economic benefits from liabilities with negative effective interest rates
(including TLTRO-III financing) is presented as interest income.
EUR thousands
2021
2020
2021
2020
Group
Group
Bank
Bank
Interest income recognised on credit impaired assets
3,747
1,153
1,458
1,105
Credit impaired financial assets are defined as all stage 3 classified assets and POCI classified assets with existing default triggers.
These besides overdue or specifically impaired assets also include non-overdue, non-restructured assets under monitoring period
and similar contracts where there are indications that the credit risk has increased significantly since origination.
NOTE 6. FEE AND COMMISSION INCOME AND EXPENSE
EUR thousands
12m 2021
12m 2020
12m 2021
12m 2020
Group
Group
Bank
Bank
Fee and commission income:
Cards
32,681
27,284
32,638
27,224
Payments and transactions
12,393
12,079
10,757
10,169
Asset management and custody
9,612
7,391
1,797
1,615
Securities brokerage
970
1,518
577
955
Other fees
1,837
1,474
1,610
1,441
Total fee and commission income from contracts with
customers
57,493
49,746
47,379
41,404
Guarantees, letters of credit and loans
3,162
2,015
2,341
2,041
Total fee and commission income
60,655
51,761
49,720
43,445
Fee and commission expense on:
Cards
(19,260)
(16,897)
(19,254)
(16,897)
Asset management, custody and securities brokerage
(1,164)
(1,046)
(918)
(759)
Payments, transactions and other fees
(3,774)
(3,637)
(3,225)
(3,089)
Total fee and commission expense
(24,198)
(21,580)
(23,397)
(20,745)
Net fee and commission income
36,457
30,181
26,323
22,700
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 36
NOTE 7. NET FINANCIAL INCOME
EUR thousands
12m 2021
12m 2020
12m 2021
12m 2020
Group
Group
Bank
Bank
Foreign exchange trading, revaluation and related
derivatives
7,266
6,076
6,805
6,587
Non-trading assets and liabilities at fair value through profit
or loss
443
3,803
381
3,264
Assets at fair value through other comprehensive income
542
1,123
428
1,023
Assets at amortised cost
-
211
-
211
Other derivatives
-
(28,836)
-
(28,836)
Modifications in cash flows which do not result in
derecognition
(932)
160
(932)
160
Total net financial income
7,319
(17,463)
6,682
(17,591)
In April 2020, as a response to a fast-developing Covid-19 situation, Citadele acquired option contracts. Among the acquired option
contracts were derivative instruments linked to stock market and high yield bond indexes with exercise dates in July 2020 and
September 2020. The objective of the acquired option contracts was to implement a tail risk defensive measures to protect the Group
and to mitigate the downside risk of a sharp and severe recession with a slow recovery. According to an internal risk assessment the
chosen option instruments provided for an insurance in a tail risk in a negative macro-economic development scenario. The acquired
option contracts did not qualify for hedge accounting. EUR 28.8 million loss on other derivatives (options) reflects the loss incurred on
negative revaluation on the acquired option contracts over the year ended 31 December 2020. With recovery in 2020 proving stronger
than anticipated and consequently market indexes fluctuating in ranges above option exercise prices, the acquired options stayed
out-of-money, market value of the option contracts declined significantly, but so did the likelihood of a sharp and severe recession.
As of 31 December 2020 and 31 December 2021, Citadele had no derivative option contracts outstanding as by that time all options
had expired or were closed out.
NOTE 8. NET OTHER INCOME
EUR thousands
2021
2020
2021
2020
Group
Group
Bank
Bank
Fulfilment of the TLTRO-III required government obligations
2,744
-
2,744
-
Operating lease income
2,088
-
-
-
Net insurance result
1,694
71
-
-
Dividend income
37
42
37
42
Sale of tangible assets
29
17,491
29
813
Share of the profit or loss of investments accounted for using
the equity method
5
-
5
-
Rental income from investment properties
-
1,041
-
-
Other income
1,051
548
2,043
2,817
Total other income
7,648
19,193
4,858
3,672
Supervisory fees
(1,759)
(1,912)
(1,605)
(1,806)
Depreciation of assets under operating lease (Note 20)
(1,578)
-
-
-
Other expenses
(2,468)
(2,872)
(1,471)
(2,029)
Total other expense
(5,805)
(4,784)
(3,076)
(3,835)
Total net other income
1,843
14,409
1,782
(163)
Other income includes net result from disposal of repossessed collaterals and other miscellaneous items which may not be considered
interest or fee and commission income. Supervisory fees include annual and quarterly fees payable to Financial and Capital Market
Commission, European Central Bank, Single Resolution Board and similar. These are directly dependent on the size of the banking
business (mostly total assets).
NOTE 9. STAFF COSTS
Personnel costs include remuneration for work to the personnel, related social security contributions, bonuses and costs of other
benefits. Other personnel expense includes health insurance, training, education and similar expenditure.
EUR thousands
2021
2020
2021
2020
Group
Group
Bank
Bank
Remuneration:
- management
4,978
4,248
1,948
1,766
- other personnel
45,840
37,829
36,036
34,528
Total remuneration for work
50,818
42,077
37,984
36,294
Social security and solidarity tax contributions:
- management
967
766
447
404
- other personnel
8,438
7,230
6,738
6,691
Total social security and solidarity tax contributions
9,405
7,996
7,185
7,095
Other personnel expense
888
815
731
752
Total personnel expense
61,111
50,888
45,900
44,141
Number of full-time equivalent employees at the period end
1,335
1,230
1,100
1,152
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 37
Non-share-based remuneration with deferred pay-out
Part of the remuneration for work is deferred up to a one-year period and subsequent pay-outs may be conditional. As at 31 December
2021 the Group and the Bank has a compulsory non-share-based deferred remuneration commitment (including related social security
and solidarity tax contributions) to its employees in the amount of EUR 407 thousand and EUR 294 thousand which will become
payable in 2022 if certain conditions are met (2020: EUR 659 thousand and EUR 393 thousand payable in 2021, respectively).
Share-based long-term incentive plans
Citadele has opened several share-based long-term incentive plans for its employees starting from 2018. Under the equity-based
long-term incentive plans active agreements as of the period end comprise 2,365 thousand of share options (2020: 1,952) with value
for accounting purposes of EUR 5.0 million (2020: EUR 3.5 million). From total active agreements EUR 3.9 million are granted to the
management (2020: EUR 3.0 million). The expense for share-based incentive plans is recognised on a straight-line basis over the
period of the remuneration program as intention is to receive services from employees over the whole period.
In the reporting period 914 thousand options were awarded and 12 thousand options were forfeited. None of the options outstanding
are exercisable as of 31 December 2021. In the reporting period 332,588 share options, previously awarded to the employees of the
Bank, vested. Refer to Note 26 (Share Capital) for additional details.
To qualify for the share options (vesting requirement), among other conditions the participant in most cases is required to remain
employed until the end of the respective deferral period. The personnel options were issued in line with the meaning of Article 2481
of the Latvian Commercial Law. Each option has the following parameters: registered share with the nominal value of EUR 1 (one
euro); convertible to the ordinary shares of Citadele (all Citadele’s ordinary shares have equal voting rights, equal rights to dividend
and equal liquidation quota), an exercise price of null euros, vesting dates are predetermined. Clawback and malus provisions apply
in the event of a material misstatement, an act of gross misconduct or an error in the assessment of performance targets. For options
granted performance is measured over a pre-agreed period ranging from tree-years to five-years. The expense is recognised as the
service is rendered. At the end of the performance measurement period, the Remuneration Committee of the Supervisory Board has
absolute discretion to determine the extent to which the awards will vest, if at all, on account of underlying Group, individual and share
price performance. The Remuneration Committee of the Supervisory Board may, in its absolute discretion, adjust upwards or
downwards and including to nil the number of options which would otherwise vest. Performance targets relate to both financial and
non-financial measures linked to the long-term business strategy of the Group, including but not limited to: Group net income, return
on capital, and strategic objectives of the Group.
NOTE 10. OTHER OPERATING EXPENSES
EUR thousands
12m 2021
12m 2020
12m 2021
12m 2020
Group
Group
Bank
Bank
Information technologies and communications
(7,409)
(5,670)
(5,002)
(4,280)
Consulting and other services
(8,625)
(6,316)
(6,182)
(5,992)
Rent, premises and real estate
(2,826)
(2,770)
(2,313)
(1,648)
Advertising and marketing
(2,863)
(1,872)
(2,468)
(1,732)
Non-refundable value added tax
(2,151)
(2,779)
(1,842)
(2,563)
Other
(1,279)
(1,650)
(953)
(1,325)
Total other expenses
(25,153)
(21,057)
(18,760)
(17,540)
Audit and other fees paid to the Group’s independent audit companies (excluding VAT, including fees for subsidiaries outside EU)
EUR thousands
2021
2020
2021
2020
Group
Group
Bank
Bank
Annual and interim audit fees
557
367
187
130
Other audit and similar fees
72
24
69
20
Tax advisory fees
-
-
-
-
Other advisory, training, and similar fees
1
7
1
7
NOTE 11. NET CREDIT LOSSES
Total net impairment allowance charged to the income statement
EUR thousands
12m 2021
12m 2020
12m 2021
12m 2020
Group
Group
Bank
Bank
Loans to credit institutions
21
(16)
12
(16)
Debt securities
(822)
(609)
(799)
(644)
Loans to public
(3,057)
(16,371)
(12,895)
(17,008)
Including impairment overlay (Note 3, section ff)
(1,050)
(4,130)
1,802
(3,233)
Loan commitments, guarantees and letters of credit
(1,721)
2,037
(1,747)
2,073
Recovered written-off assets
3,966
5,608
3,687
5,216
Total net losses on financial instruments
(1,613)
(9,351)
(11,742)
(10,379)
Allowances for credit losses are recognised based on the future loss expectations. The forward-looking information in the
measurement of expected credit losses is implemented through adjustment for future economic development scenarios. As a result
of recent events related to Covid-19 the adjustment for expected impact from future economic scenarios was revised. Subsequently,
in the reporting period allowance charges for the expected credit losses (including management’s impairment overlay) for the Group
and the Bank increased by EUR 6.2 million and EUR 7.5 million compared to the prior year. Due to the forward looking nature of the
credit loss estimation, the increase in loss allowances does not necessarily represent an observable deterioration in the current credit
quality of the loan portfolio (for detail refer to Note 16 (Loans to Public)), but is more a representation of a deterioration in the forward
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 38
looking economic scenarios component. Despite increase in overall risk charges, ECL allowances for unutilised part of the loan
commitments decreased. The decrease in ECL allowances for unutilised part of the loan commitments is a result of a combination of
the annual ECL model recalibration, within which conversion factors for unutilised loan commitments were updated, and decrease in
the total loan commitments of the Group outstanding by EUR 69.2 million and for the Bank by EUR 134.8 million; for details refer to
Note 27 (Off-balance Sheet Items).
In 2020 the Group and the Bank recognised an impairment overlay for Stage 1 classified loans to public exposures. The impairment
overlay addressed increased uncertainty regarding the forward-looking economic conditions in the unusual environment where
duration and severity of Covid-19 situation and associated possible disruptions to the Baltic economies and customers of the Group
was uncertain. The impairment overlay accounts for economic risks which point in time ECL models calibrated on historical data,
despite being adjusted with forward-looking information, might not be fully capturing. The impairment overlay as of 31 December 2021
was reassessed by aligning overlay calculations more to the actual performance of Group's loan portfolio during 2020 instead vs.
previous inputs based in performance during 2008-2009 financial crisis. The impairment overlay concept is maintained as the
uncertainty continues to persist.
When a loan is fully or partially written-off, the claim against the borrower normally is not forgiven. From time to time previously written-
off assets are recovered due to repayment, sale of pool of overdue assets to companies specialising in recoveries of balances in
arrears, or as a result of other resolution. Such recoveries are reported as recovered written-off assets.
Classification of impairment stages
Stage 1 – Financial instruments without significant increase in credit risk since initial recognition
Stage 2 – Financial instruments with significant increase in credit risk since initial recognition but not credit-impaired
Stage 3 – Credit-impaired financial instruments
Changes in the allowances for credit losses and provisions
Group, EUR thousands
Opening
balance
01/01/2021
Charged to
statement
of income
Write-offs
of allow-
ances
Acquisition
and other
adjust-
ments
Closing
balance
31/12/2021
Stage 1
Loans to credit institutions
104
(21)
-
10
93
Debt securities
1,191
822
-
2
2,015
Loans to public
19,662
8,196
-
7,346
35,204
Including impairment overlay
4,130
(1,834)
-
2,884
5,180
Loan commitments, guarantees and letters of credit
1,903
1,473
-
2
3,378
Total stage 1 credit losses and provisions
22,860
10,470
-
7,360
40,690
Stage 2
Loans to public
4,058
(167)
-
6,811
10,702
Loan commitments, guarantees and letters of credit
41
317
-
-
358
Total stage 2 credit losses and provisions
4,099
150
-
6,811
11,060
Stage 3
Loans to public
35,720
(4,971)
(9,346)
14,306
35,709
Loan commitments, guarantees and letters of credit
167
(69)
-
-
98
Total stage 3 credit losses and provisions
35,887
(5,040)
(9,346)
14,306
35,807
Total allowances for credit losses and
provisions
62,846
5,580
(9,346)
28,477
87,557
Including for debt securities classified at fair
value through other comprehensive income
135
136
Including for loans of SIA Citadele Leasing
-
15,286
In the year ended 31 December 2021, the increase of EUR 15.3 million in the Group’s consolidated period end balance of allowances
for credit losses is a result of the recent acquisition of SIA UniCredit Leasing (renamed to SIA Citadele Leasing), while the increase
of EUR 1.1 million in the Bank’s standalone stock of allowances for credit losses and provisions relates to credit lines extended to the
recently acquired subsidiary. EUR 26.8 million from the total “Acquisition and other adjustments” relate to SIA UniCredit Leasing
acquisition.
In case of purchased or originated credit impaired (POCI) loans originated before acquisition date by the recently acquired subsidiary,
the initial recognition date for these POCI loans in the Group’s consolidated accounts is the acquisition date of the subsidiary. For
POCI loans only the cumulative changes in lifetime expected credit losses since initial recognition are recognised as a loss allowance.
Favourable changes in lifetime expected credit losses are recognised as an impairment gain, even if the lifetime expected credit losses
are less than the amount of expected credit losses that were included in the estimated cash flows on initial recognition.
Total Group’s provisions of EUR 3,934 thousand (2020: EUR 2,211 thousand) as of the period end comprise of ECL allowances for
loan commitments, guarantees and letters of credit of EUR 3,834 thousand (2020: EUR 2,111 thousand) and other Non-ECL
provisions of EUR 100 thousand (2020: EUR 100 thousand) disclosed in Note 12 (Other Impairment Losses and Other Provisions).
Total Bank’s provisions of EUR 3,882 thousand (2020: EUR 2,133 thousand) as of the period end comprise EUR 3,781 thousand
(2020: EUR 2,033 thousand) for loan commitments, guarantees and letters of credit and EUR 100 thousand (2020: EUR 100 thousand)
for other Non-ECL provisions.
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 39
Group, EUR thousands (Reclassified)
Opening
balance
01/01/2020
Charged to
statement
of income
Write-offs
of allow-
ances
Other
adjust-
ments
Closing
balance
31/12/2020
Stage 1
Loans to credit institutions
97
16
-
(9)
104
Debt securities
584
609
-
(2)
1,191
Loans to public
12,348
7,317
-
(3)
19,662
Including impairment overlay
-
4,130
-
-
4,130
Loan commitments, guarantees and letters of credit
3,420
(1,516)
-
(1)
1,903
Total stage 1 credit losses and provisions
16,449
6,426
-
(15)
22,860
Stage 2
Loans to public
5,568
(1,510)
-
-
4,058
Loan commitments, guarantees and letters of credit
172
(130)
-
(1)
41
Total stage 2 credit losses and provisions
5,740
(1,640)
-
(1)
4,099
Stage 3
Loans to public
38,785
10,564
(11,756)
(1,873)
35,720
Loan commitments, guarantees and letters of credit
558
(391)
-
-
167
Total stage 3 credit losses and provisions
39,343
10,173
(11,756)
(1,873)
35,887
Total allowances for credit losses and
provisions
61,532
14,959
(11,756)
(1,889)
62,846
Including for debt securities classified at fair
value through other comprehensive income
116
135
Bank, EUR thousands
Opening
balance
01/01/2021
Charged to
statement
of income
Write-offs of
allowances
Other
adjust-
ments
Closing
balance
31/12/2021
Stage 1
Loans to credit institutions
104
(12)
-
1
93
Debt securities
1,127
799
-
1
1,927
Loans to public
17,384
5,818
-
(18)
23,184
Including impairment overlay (Note 3, section ff)
3,233
(1,802)
-
-
1,431
Loan commitments, guarantees and letters of
credit
1,825
1,499
-
1
3,325
Total stage 1 credit losses and provisions
20,440
8,104
-
(15)
28,529
Stage 2
Loans to public
3,901
4,972
-
-
8,873
Loan commitments, guarantees and letters of
credit
41
317
-
-
358
Total stage 2 credit losses and provisions
3,942
5,289
-
-
9,231
Stage 3
Loans to public
34,475
2,105
(5,754)
1,718
32,544
Loan commitments, guarantees and letters of
credit
167
(69)
-
-
98
Total stage 3 credit losses and provisions
34,642
2,036
(5,754)
1,718
32,642
Total allowances for credit losses and
provisions
59,024
15,429
(5,754)
1,703
70,402
Including for debt securities classified at fair value
through other comprehensive income
81
97
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 40
Bank, EUR thousands
Opening
balance
01/01/2020
Charged to
statement
of income
Write-offs of
allowances
Other
adjust-
ments
Closing
balance
31/12/2020
Stage 1
Loans to credit institutions
97
16
-
(9)
104
Debt securities
484
644
-
(1)
1,127
Loans to public
10,543
6,842
-
(1)
17,384
Including impairment overlay (Note 3, section ff)
-
3,233
-
-
3,233
Loan commitments, guarantees and letters of
credit
3,378
(1,551)
-
(2)
1,825
Total stage 1 credit losses and provisions
14,502
5,951
-
(13)
20,440
Stage 2
Debt securities
-
-
Loans to public
5,184
(1,283)
-
-
3,901
Loan commitments, guarantees and letters of
credit
172
(130)
-
(1)
41
Total stage 2 credit losses and provisions
5,356
(1,413)
-
(1)
3,942
Stage 3
Loans to public
36,616
11,449
(11,737)
(1,853)
34,475
Loan commitments, guarantees and letters of
credit
558
(392)
-
1
167
Total stage 3 credit losses and provisions
37,174
11,057
(11,737)
(1,852)
34,642
Total allowances for credit losses and
provisions
57,032
15,595
(11,737)
(1,866)
59,024
Including for debt securities classified at fair value
through other comprehensive income
42
81
NOTE 12. OTHER IMPAIRMENT LOSSES AND OTHER PROVISIONS
Changes in impairment allowances for investments in subsidiaries, tangible, intangible and other assets
Group, EUR thousands
Opening
balance
01/01/2021
Charged to
statement of
income
Write-offs and
other
adjustments
Closing
balance
31/12/2021
Other impairment allowances and other provisions
Tangible and intangible assets (Note 20)
353
-
-
353
Other assets
1,433
198
(89)
1,542
Non-ECL provisions
100
-
-
100
Total other impairment allowance and other provisions
1,886
198
(89)
1,995
Group, EUR thousands
Opening
balance
01/01/2020
Charged to
statement of
income
Write-offs and
other
adjustments
Closing
balance
31/12/2020
Other impairment allowances and other provisions
Tangible and intangible assets (Note 20)
113
263
(23)
353
Other assets
976
743
(286)
1,433
Non-ECL provisions
-
100
-
100
Total other impairment allowance and other provisions
1,089
1,106
(309)
1,886
Bank, EUR thousands
Opening
balance
01/01/2021
Charged to
statement of
income
Write-offs and
other
adjustments
Closing
balance
31/12/2021
Other impairment allowances and other provisions
Tangible and intangible assets (Note 20)
342
-
-
342
Investments in related entities
24,177
(1,140)
(114)
22,923
Other assets
1,350
199
(82)
1,467
Non-ECL provisions
100
-
-
100
Total other impairment allowance and other provisions
25,969
(941)
(196)
24,832
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 41
Bank, EUR thousands
Opening
balance
01/01/2020
Charged to
statement of
income
Write-offs and
other
adjustments
Closing
balance
31/12/2020
Other impairment allowances and other provisions
Tangible and intangible assets (Note 20)
-
342
-
342
Investments in related entities
37,196
(12,970)
(49)
24,177
Other assets
689
723
(62)
1,350
Non-ECL provisions
-
100
-
100
Total other impairment allowance and other provisions
37,885
(11,805)
(111)
25,969
For more details on the investments in subsidiaries refer to Note 19 (Investments in Related Entities).
NOTE 13. TAXATION
Corporate income tax expense
EUR thousands
2021
2020
2021
2020
Group
Group
Bank
Bank
Current corporate income tax
971
388
318
117
Deferred income tax
626
(82)
-
-
Total corporate income tax expense
1,597
306
318
117
In Latvia and Estonia corporate income tax (CIT) is payable when the profits are distributed, not when the profits are earned.
Correspondingly, the deferred tax is calculated at a tax rate which applies to undistributed earnings, which is 0%. The effective tax
rate in the reporting period for the Group and the Bank in Latvia and Estonia was close to 0%. In Latvia, incremental CIT expense
does not arise on dividend distribution from retained earnings generated under the previous tax regime (EUR 81.8 million for the
Bank), and there is no expiry date for this distribution right. In Latvia, for dividend distributions from profits earned under the current
tax regime, a 20% CIT rate applies and is calculated as 0.2/0.8 from net distributed dividend. In other jurisdictions where the Group
operates, earnings are taxable when earned. The effective tax rate for Lithuanian operations was less than 10%, primarily due to a
positive impact from revised estimates of recognisable unutilized tax loss. Overall, almost all of the Group’s and the Bank’s corporate
income tax expense for the reporting period relates to Lithuania operations. As at period end, a part of the Group’s and Bank’s
unutilised tax loss is not recognised for deferred tax asset purposes as there is uncertainty about availability of sufficient future taxable
profits with which to offset accumulated tax loss at the level of the particular entity. The recognised deferred tax asset mostly represents
unutilised tax loss in Lithuania.
Income tax assets and liabilities
EUR thousands
31/12/2021
31/12/2020
31/12/2021
31/12/2020
Group
Group
Bank
Bank
Deferred income tax assets
2,676
2,387
2,179
2,179
Current income tax assets
1,927
885
871
878
Tax assets
4,603
3,272
3,050
3,057
Deferred income tax liabilities
(376)
(464)
-
-
Current income tax liabilities
(197)
(213)
(189)
(115)
Tax liabilities
(573)
(677)
(189)
(115)
The Group has recognised a deferred tax liability of EUR 0.4 million as in Estonia it anticipates paying out dividends to Latvia. These
dividends would become taxable at distribution.
Change in net deferred corporate income tax asset / (liability)
EUR thousands
2021
2020
2021
2020
Group
Group
Bank
Bank
As at the beginning of the period
1,923
1,753
2,179
2,179
Integration of SIA UniCredit Leasing
914
-
-
-
Charge to statement of income
(626)
82
-
-
Charge to statement of comprehensive income
89
88
-
-
Net deferred income tax asset at the period end
2,300
1,923
2,179
2,179
Group, EUR thousands
Opening
balance
31/12/2020
Integration
of SIA
UniCredit
Leasing
Recognised
in statement
of OCI
Recognised
in statement
of income
Closing
balance
31/12/2021
Deferred income and accrued expense
405
117
-
(79)
443
Recognised unutilised tax loss carry-forward
1,978
-
-
(192)
1,786
Fair value adjustment on the acquired loan
portfolio
-
797
-
(349)
448
Expected distribution of retained earnings
(375)
-
-
-
(375)
Other items, net
(85)
-
89
(6)
(2)
Deferred income tax assets, net
1,923
914
89
(626)
2,300
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 42
Bank, EUR thousands
Opening
balance
31/12/2020
Recognised
in statement
of income
Recognised
in statement
of OCI
Closing
balance
31/12/2021
Deferred income and accrued expense
332
61
-
393
Recognised unutilised tax loss carry-forward
1,847
(61)
-
1,786
Deferred income tax assets, net
2,179
-
-
2,179
Reconciliation of the pre-tax profit to the corporate income tax expense
EUR thousands
2021
2020
2021
2020
Group
Group
Bank
Bank
Profit before corporate income tax
56,642
3,914
29,961
(4,644)
Corporate income tax (at 20%)
11,328
783
5,992
(929)
Undistributed earnings taxable on distribution
(9,216)
4
(4,939)
1,517
Effect of tax rates in foreign jurisdictions
(900)
(518)
(255)
(147)
Non-taxable income
(2,384)
(707)
(295)
(247)
Non-deductible expense
1,715
930
286
112
Expected distribution of retained earnings
-
-
-
-
Other tax differences, net (incl. changes in unrecognised
deferred tax asset)
1,054
(186)
(471)
(189)
Total effective corporate income tax
1,597
306
318
117
Part of the Group’s unutilised tax losses are not recognised for deferred tax asset purposes as there is uncertainty about availability
of sufficient future taxable profits with which to offset accumulated tax losses at particular subsidiary’s level. The recognisable amount
assessment is based on reasonably certain 3 year forecast of the respective subsidiary’s ability to utilised tax losses. Most of the
recognised deferred tax asset represents unutilised tax loss carry forward in Lithuania.
NOTE 14. CASH AND CASH BALANCES AT CENTRAL BANKS
EUR thousands
31/12/2021
31/12/2020
31/12/2021
31/12/2020
Group
Group
Bank
Bank
Cash
39,942
37,810
39,942
37,810
Balances with the Bank of Latvia
234,860
1,016,446
234,860
1,016,446
Balances with other central banks
96,223
92,350
86,824
76,752
Total cash and balances with central banks
371,025
1,146,606
361,626
1,131,008
Credit institutions should comply with the compulsory reserve requirement calculated based on attracted funding. The Bank’s
compulsory minimum reserve must be exceeded by a credit institution’s average monthly balance on its correspondent account with
the central bank. Similar requirements also apply to the funding attracted by the banking subsidiary in Switzerland. During the reporting
period, the Group’s was in compliance with this requirement. Demand deposits with other central banks include balances with central
banks of Lithuania, Switzerland and Estonia. In the reporting period no amounts due from central banks were overdue.
NOTE 15. DEBT SECURITIES
Debt securities by credit rating grade, classification and profile of issuer
Group, EUR thousands
31/12/2021
31/12/2020
At fair value
through other
comprehensive
income
At
amortised
cost
Total
At fair value
through other
comprehensive
income
At
amortised
cost
Total
Investment grade:
AAA/Aaa
60,706
98,933
159,639
67,640
108,929
176,569
AA/Aa
37,904
268,521
306,425
78,451
251,826
330,277
A
225,476
1,024,958
1,250,434
204,857
988,657
1,193,514
BBB/Baa
16,118
19,059
35,177
25,763
23,389
49,152
Lower ratings or unrated
497
49,548
50,045
263
10,415
10,678
Total debt securities
340,701
1,461,019
1,801,720
376,974
1,383,216
1,760,190
Including general government
217,119
1,096,043
1,313,162
197,816
1,036,342
1,234,158
Including credit institutions
35,606
163,270
198,876
79,665
176,665
256,330
Including classified in stage 1
340,701
1,461,019
1,801,720
376,974
1,383,216
1,760,190
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 43
Bank, EUR thousands
31/12/2021
31/12/2020
At fair value
through other
comprehensive
income
At
amortised
cost
Total
At fair value
through other
comprehensive
income
At
amortised
cost
Total
Investment grade:
AAA/Aaa
32,727
84,967
117,694
27,671
93,808
121,479
AA/Aa
14,703
256,295
270,998
33,067
238,556
271,623
A
184,238
1,011,665
1,195,903
162,938
974,237
1,137,175
BBB/Baa
1,498
16,668
18,166
1,034
21,949
22,983
Lower ratings or unrated
-
49,547
49,547
-
10,415
10,415
Total debt securities
233,166
1,419,142
1,652,308
224,710
1,338,965
1,563,675
Including general government
185,496
1,083,706
1,269,202
158,559
1,016,650
1,175,209
Including credit institutions
5,219
151,193
156,412
27,505
167,613
195,118
Including classified in stage 1
233,166
1,419,142
1,652,308
224,710
1,338,965
1,563,675
Unrated debt securities or debt securities with lower ratings than BBB are mainly with corporates and are acquired or in some cases
structured by the Bank as an alternative to ordinary lending transactions. Among considerations for originating such lending products
is longer-term indirect benefits from development in local corporate debt markets and higher potential liquidity for lending products
structured as debt securities.
Debt securities by country of issuer
Group, EUR thousands
31/12/2021
31/12/2020
Government
bonds
Other
securities
Total
Government
bonds
Other
securities
Total
Lithuania
590,023
45,847
635,870
594,762
6,951
601,713
Latvia
478,272
3,500
481,772
417,450
3,526
420,976
Estonia
75,608
21,374
96,982
48,027
20,480
68,507
Germany
12,710
72,922
85,632
16,011
60,846
76,857
Poland
70,246
6,060
76,306
71,716
5,574
77,290
United States
12,718
34,527
47,245
11,680
50,395
62,075
Netherlands
10,651
33,504
44,155
14,641
81,459
96,100
Sweden
3,083
40,842
43,925
3,107
42,602
45,709
Canada
-
41,933
41,933
5,192
43,718
48,910
Finland
5,000
30,910
35,910
4,998
32,819
37,817
Multilateral development banks
-
49,532
49,532
-
49,650
49,650
Other countries and funds
54,851
107,607
162,458
46,574
128,012
174,586
Total debt securities
1,313,162
488,558
1,801,720
1,234,158
526,032
1,760,190
Bank, EUR thousands
31/12/2021
31/12/2020
Government
bonds
Other
securities
Total
Government
bonds
Other
securities
Total
Lithuania
582,026
44,111
626,137
586,259
5,411
591,670
Latvia
468,861
2,185
471,046
408,536
2,067
410,603
Estonia
75,608
19,230
94,838
48,027
18,823
66,850
Germany
10,000
59,468
69,468
9,999
46,280
56,279
Poland
66,246
3,075
69,321
68,507
3,092
71,599
United States
12,718
34,527
47,245
9,999
29,813
39,812
Netherlands
10,651
33,504
44,155
10,870
64,664
75,534
Canada
-
41,933
41,933
-
35,181
35,181
Sweden
-
39,516
39,516
-
39,177
39,177
Finland
5,000
30,910
35,910
4,998
31,163
36,161
Multilateral development banks
-
49,532
49,532
-
37,262
37,262
Other countries and funds
38,092
25,115
63,207
28,014
75,533
103,547
Total debt securities
1,269,202
383,106
1,652,308
1,175,209
388,466
1,563,675
No payments on the debt securities are past due. Total exposure to any single country within “Other countries” group as of period end
is smaller than 10% of the regulatory capital.
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 44
NOTE 16. LOANS TO PUBLIC
Loans by customer profile, industry profile and product type
EUR thousands
31/12/2021
31/12/2020
31/12/2021
31/12/2020
Group
Group
Bank
Bank
Financial and non-financial corporations
Real estate purchase and management
261,626
215,831
248,158
212,639
Manufacturing
232,824
146,386
121,038
117,009
Transport and communications
219,457
100,920
33,327
38,161
Trade
191,534
109,635
78,804
86,307
Agriculture and forestry
148,497
79,927
73,439
56,156
Construction
136,358
40,760
58,533
29,761
Electricity, gas and water supply
78,990
46,059
49,744
43,727
Hotels, restaurants
45,003
43,108
39,334
41,321
Financial intermediation
26,266
22,470
990,811
219,877
Other industries
178,615
44,023
35,068
24,401
Total financial and non-financial corporations
1,519,170
849,119
1,728,256
869,359
Households
Mortgage loans
782,995
541,636
782,995
541,636
Credit for consumption
71,544
68,721
71,544
68,721
Card lending
55,794
58,411
55,794
58,411
Finance leases
307,597
42,848
-
-
Other lending
24,959
20,204
18,983
16,515
Total households
1,242,889
731,820
929,316
685,283
General government
21,065
19,724
16,742
19,431
Total gross loans to public
2,783,124
1,600,663
2,674,314
1,574,073
Impairment allowance and provisions
(81,615)
(59,440)
(64,601)
(55,760)
Total net loans to public
2,701,509
1,541,223
2,609,713
1,518,313
Loans by overdue days and impairment stage
Group, EUR thousands
31/12/2021
31/12/2020
Gross amount
Expected
credit loss
allowance
Net
carrying
amount
Gross amount
Expected
credit loss
allowance
Net
carrying
amount
Stage 1
Stage 2
Stage 3
and
POCI
Stage 1
Stage 2
Stage 3
and
POCI
Loans to public
Not past due
2,412,494
216,166
44,911
(44,319)
2,629,252
1,429,589
84,151
13,780
(25,946)
1,501,574
Past due <=30
days
38,085
10,287
993
(5,983)
43,382
22,496
4,736
1,095
(1,321)
27,006
Past due >30 and
≤90 days
-
15,100
7,635
(2,587)
20,148
-
4,043
1,873
(1,701)
4,215
Past due >90
days
-
-
37,453
(28,726)
8,727
-
-
38,900
(30,472)
8,428
Total loans to
public
2,450,579
241,553
90,992
(81,615)
2,701,509
1,452,085
92,930
55,648
(59,440)
1,541,223
Guarantees and
letters of credit
29,002
100
161
(222)
29,041
22,418
-
51
(142)
22,327
Financial
commitments
378,107
9,217
275
(3,605)
383,994
258,432
1,814
408
(1,969)
258,685
Total credit
exposure to
public
2,857,688
250,870
91,428
(85,442)
3,114,544
1,732,935
94,744
56,107
(61,551)
1,822,235
As of 31 December 2021, the gross amount of Group’s POCI loans to public is EUR 26.1 million (2020: EUR 0 million). The recognised
expected credit loss allowance on POCI loans to public is EUR 0.2 million (2020: EUR 0 million). Off-balance sheet credit exposure
comprises various committed financing facilities to the borrowers. For details refer to Note 27 (Off-balance Sheet Items).
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 45
Bank, EUR thousands
31/12/2021
31/12/2020
Gross amount
Expected
credit loss
allowance
Net
carrying
amount
Gross amount
Expected
credit loss
allowance
Net
carrying
amount
Stage 1
Stage 2
Stage 3
Stage 1
Stage 2
Stage 3
Loans to public
Not past due
2,435,524
141,440
27,492
(29,803)
2,574,653
1,425,915
81,574
11,803
(23,180)
1,496,112
Past due <=30
days
22,051
9,185
826
(5,738)
26,324
7,870
2,969
902
(1,105)
10,636
Past due >30 and
≤90 days
-
3,237
1,375
(1,220)
3,392
-
3,155
1,674
(1,554)
3,275
Past due >90
days
-
-
33,184
(27,840)
5,344
-
-
38,211
(29,921)
8,290
Total loans to
public
2,457,575
153,862
62,877
(64,601)
2,609,713
1,433,785
87,698
52,590
(55,760)
1,518,313
Guarantees and
letters of credit
33,601
100
161
(222)
33,640
21,761
-
51
(142)
21,670
Financial
commitments
421,574
9,217
275
(3,552)
427,514
273,867
1,814
408
(1,891)
274,198
Total credit
exposure to
public
2,912,750
163,179
63,313
(68,375)
3,070,867
1,729,413
89,512
53,049
(57,793)
1,814,181
Stage 3 loans to public ratio
31/12/2021
31/12/2020
31/12/2021
31/12/2020
Group
Group
Bank
Bank
Stage 3 loans to public ratio, gross
3.3%
3.5%
2.4%
3.3%
Stage 3 loans to public ratio, net
2.0%
1.3%
1.2%
1.2%
Stage 3 impairment ratio
39.2%
64%
52%
66%
The stage 3 loans to public ratio is calculated as stage 3 loans to public divided by total loans to public as of the end of the relevant
period. All loans overdue by more than 90 days are classified as stage 3. Non-overdue loans and loans overdue less than 90 days
which have been forborne or impairment loses have been identified based on individual assessment or financial condition of the
borrower has deteriorated significantly are classified as stage 3. Part of the loans classified as stage 3 do not have any current default
indicators but are put under monitoring period for a specific time before being reclassified out of stage 3. Loans under recovery are
also classified as stage 3.
The stage 3 impairment ratio is calculated as impairment allowance for stage 3 exposures divided by gross loans to public classified
as stage 3. Impairment allowance is the amount of expected credit loss expensed in the income statement as credit loss and is derived
from historic loss rates and future expectations, and where available considering fair value of the loan collateral.
NOTE 17. LEASES
Finance leases (a part of loans to public) by type of assets financed
EUR thousands
31/12/2021
31/12/2020
31/12/2021
31/12/2020
Group
Group
Bank
Bank
Transport vehicles
719,261
156,895
-
-
Manufacturing equipment
129,037
30,051
-
-
Industrial, office and other equipment
151,445
11,219
-
-
Total present value of finance lease payments,
excluding impairment
999,743
198,165
-
-
Impairment allowance
(16,747)
(3,527)
-
-
Net present value of finance lease payments
982,996
194,638
-
-
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 46
Reconciliation of the gross investment in the finance leases and the present value of minimum lease payments receivable
EUR thousands
31/12/2021
31/12/2020
31/12/2021
31/12/2020
Group
Group
Bank
Bank
Gross investment in finance leases receivable:
within one year
314,036
77,812
-
-
in year two
268,991
57,115
-
-
in year three
221,304
42,568
-
-
in year four
147,375
24,057
-
-
In year five
97,397
12,642
-
-
later than in five years
15,041
311
-
Total gross investment in finance leases
1,064,144
214,505
-
-
Unearned finance income receivable:
within one year
(27,366)
(6,557)
-
-
in year two
(18,228)
(4,902)
-
-
in year three
(11,011)
(3,050)
-
-
in year four
(5,609)
(1,394)
-
-
In year five
(1,767)
(432)
-
-
later than in five years
(420)
(5)
-
-
Total
(64,401)
(16,340)
-
-
Present value of minimum lease payments receivable:
within one year
286,670
71,255
-
-
in year two
250,763
52,213
-
-
in year three
210,293
39,518
-
-
in year four
141,766
22,663
-
-
In year five
95,630
12,210
-
-
later than in five years
14,621
306
-
-
Total
999,743
198,165
-
-
NOTE 18. EQUITY AND OTHER FINANCIAL INSTRUMENTS
Shares and other non-fixed income securities by issuers profile and classification
Group, EUR thousands
31/12/2021
31/12/2020
Mutual
investment
funds
Foreign
equities
Latvian
equities
Total
Mutual
investment
funds
Foreign
equities
Latvian
equities
Total
Non-trading financial assets
at fair value through profit
or loss
42,032
1,076
-
43,108
43,343
4,497
-
47,840
Financial assets at fair value
through other
comprehensive income
-
79
124
203
-
143
124
267
Total non-fixed income
securities, net
42,032
1,155
124
43,311
43,343
4,640
124
48,107
Including unit-linked
insurance plan assets
25,476
-
-
25,476
21,026
-
-
21,026
All exposures in mutual investment funds which are classified as financial assets designated at fair value through profit or loss are
related to the life insurance business, most of these with unit-linked insurance plan assets. According to unit-linked investment contract
terms, the risk associated with the investments made by the insurance underwriter is fully attributable to the counterparty entering the
insurance agreement and not the underwriter.
As of 31 December 2021, the Bank and the Group has investments in mutual investment funds with carrying amounts of EUR 7.4
million (2020: EUR 13.8 million) and EUR 25.8 million (2020: EUR 27.2 million) which are managed by IPAS CBL Asset Management.
Further, EUR 15.2 million (2020: EUR 10.8 million) of these Group’s investments relate to unit-linked contracts, where the risk
associated with the investments made is fully attributable to the counterparty entering the insurance agreement and not the
underwriter. These exposures have been acquired only with investment intentions. The Bank has no exposure to investments related
to unit-linked contracts.
Bank, EUR thousands
31/12/2021
31/12/2020
Mutual
investment
funds
Foreign
equities
Latvian
equities
Total
Mutual
investment
funds
Foreign
equities
Latvian
equities
Total
Non-trading financial assets
at fair value through profit
or loss
7,400
1,076
-
8,476
13,834
4,497
-
18,331
Financial assets at fair value
through other
comprehensive income
-
79
124
203
-
143
124
267
Total non-fixed income
securities, net
7,400
1,155
124
8,679
13,834
4,640
124
18,598
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 47
NOTE 19. INVESTMENTS IN RELATED ENTITIES
Changes in investments in related entities of the Bank
EUR thousands
12m 2021
12m 2020
Balance at the beginning of the period, net
46,756
34,161
Equity investments and acquisitions
29,203
-
Investments in associates accounted for using the
equity method
5
274
Liquidation of subsidiary
(8)
(649)
Change in impairment allowance
1,131
12,970
Balance at the end of the period, net
77,087
46,756
Including associates accounted for using the equity
method
279
274
Including gross investment in subsidiaries
99,731
70,660
Acquisition of UniCredit leasing operations in the Baltics
In 2019 AS Citadele banka entered into a binding agreement with UniCredit S.p.A. to acquire UniCredit’s Baltic leasing operations
through the acquisition of 100% of the shares in SIA UniCredit Leasing. Citadele obtained full control from the beginning of January
2021. After completion of the acquisition transaction in 2021, the acquired entity was renamed to SIA Citadele Leasing. The acquisition
includes Estonian and Lithuanian branches of the leasing entity and a subsidiary SIA CL Insurance Broker (former legal name SIA
UniCredit Insurance Broker). After the acquisition, Citadele refinanced existing borrowings of the acquired entity and committed
lending of up to EUR 880 million in total. Over the two-year period leading up to the acquisition date a total of EUR 0.7 million
acquisition costs were incurred. All acquisition-related costs have been recognised as other operating expense.
The acquired leasing subsidiary is one of the leaders in the Baltics, with more than 20 years of experience in the area of leasing and
a demonstrated ability to deliver sustainable business growth. Following the acquisition Citadele’s aggregate leasing portfolio exceeds
EUR 1 billion, creating a stronger Baltic Leasing offering allowing for economies of scale, synergies and shareholder value.
As of period end, the sales-purchase price has been finalised. The final settlement and the acquisition accounting for the business
combination has been completed. Based on the fair value assessments of the business (modelling present value of future expected
free equity distributable to the shareholders, after required equity allocation for capital adequacy compliance), assets, liabilities,
potential intangibles and onerous agreements acquired, the major fair value adjustment was allocated to the loan portfolio, which was
the main asset of the acquired entity. Key assumptions in the fair value estimation were impairment levels and expected yields of the
acquired loan portfolio. The fair value adjustment in relation to the Lithuanian branch of the acquired business triggered recognition
of a deferred tax asset in the amount of EUR 0.8 million. The fair value assessment of the loan portfolio was derived by discounting
expected future loan cash flows with up-to-date required lending yields and by estimating recoverability of the acquired loan contracts.
The undiscounted gross contractual amounts receivable from the acquired loan portfolio were EUR 908 million with EUR 37 million
recognised as an impairment loss on the contractual cash flows not expected to be collected. Besides allowances for impairment loss,
on average higher required rate of return versus actual effective interest rates of the acquired loan portfolio contributed to a lower fair
value than the portfolio’s acquisition date carrying value.
Major agreements, customer-related intangibles and assumed commitments were analysed in detail, in particular client loyalty,
acquiree’s client portfolio overlap with existing Citadele’s clients, sales channel structure and arrangements. Acquiree’s existing
borrowing from credit institutions were refinanced on the acquisition date at the amount outstanding which was fair value of these
liabilities. Acquiree’s existing trademarks were not part of the sales-purchase transaction and after a short transition period, usage of
these was ceased.
Identifiable assets acquired and liabilities assumed as of the acquisition date of UniCredit leasing operations in the Baltics
Citadele obtained full control of the acquiree from the beginning of January 2021 which is the date of the transaction. No gain from
bargain purchase or goodwill was recognised on the transaction as the fair value of the identifiable net assets acquired approximated
the total consideration paid in cash to the previous owner. The overall day-one cash outflow for the Group as a result of the acquisition
was EUR 799 million, as besides consideration paid and cash and cash equivalent obtained, AS Citadele Banka at an arm’s length
transaction refinanced acquiree’s existing borrowing from credit institutions.
EUR
thousands
Cash and credit institution balances
23,709
Loans to public
792,341
Tangible and intangible assets
11,843
Deferred tax assets
915
Other assets
10,948
Borrowing from credit institutions
(793,056)
Other liabilities
(16,547)
Provisions
(950)
Total fair value of identifiable net assets acquired
29,203
Total consideration, paid in cash
(29,203)
Gain from bargain purchase / (Goodwill)
-
Changes in investments in and valuation of other subsidiaries
SIA Hortus Land was liquidated on 27 September 2021 as the entity had no ongoing operations. Similarly, Calenia Investments Limited
was liquidated in December 2021.
In the reporting period valuation of SIA Citadele Factoring, SIA Citadeles moduļi and SIA Hortus Residential was reassessed. In total
EUR 1.1 million net release of impairment in the investments in these subsidiaries was recognised as a result of an improved
expectations of future free cash flows distributable to shareholders of SIA Citadele Factoring and an improved profitability of SIA
Hortus Residential while for SIA Citadeles moduļi future expenditure was reassessed resulting in decrease in valuation.
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 48
Carrying value of the investment in SIA Citadele Factoring is derived from present value of expected free equity distributable to the
shareholders, after required equity allocation for capital adequacy compliance. The target capital adequacy ratio is set at 12% and
includes allocated charges for all banking risks inherent in the business model of the leasing plus full set of regulatory buffers as
applicable for the Group consolidated and on top of that a managements buffer. Other key inputs of the model are 12.0% (2020:
12.0%) discount rate and future profitability of the operations of the entity. Sensitivity scenarios: if discount rate was +/-100 basis
points than the carrying value would change by EUR -0.8/+0.9 million (2020: EUR +/-0.2 million), if net result was +/-10% than the
carrying value would change by EUR +/-1.3 million (2020: EUR +/-0.04 million).
Carrying value of the investment in SIA Citadeles moduļi is estimated as a residual interest in the assets of the entity (mostly cash)
after deducting all of its liabilities, adjusted for future cash flows. Previously the major asset of the entity was the Group’s Latvian
headquarters building. After the sale of the property in 2020 the major asset of the company is cash. As of 31 December 2021 and 31
December 2020 the valuation of the company is not sensitive to any significant key inputs.
Consolidation Group subsidiaries and associated entities for accounting purposes
Company
Registration
number
Registration address
and country
Company
type*
Basis for
inclusion in
the Group**
The
Group’s
share
(%)
% of total
voting
rights
Carrying value
EUR thousands
31/12/2021
31/12/2020
AS Citadele banka
40103303559
Latvia, Riga, Republikas
laukums 2A
BNK
MT
-
-
-
-
SIA Citadele Leasing
40003423085
Latvia, Riga, Republikas
laukums 2A
LIZ
MS
100
100
29,203
-
SIA Citadeles moduļi
40003397543
Latvia, Riga, Republikas
laukums 2A
PLS
MS
100
100
15,752
15,932
Kaleido Privatbank AG
130.0.007.738-0
Switzerland, Bellerivestrasse
17, 8008, Zürich
BNK
MS
100
100
13,805
13,805
SIA Citadele Factoring
50003760921
Latvia, Riga, Republikas
laukums 2A
LIZ
MS
100
100
8,043
6,921
IPAS CBL Asset Management
40003577500
Latvia, Riga, Republikas
laukums 2A
IPS
MS
100
100
5,906
5,906
UAB Citadele Factoring
126233315
Lithuania, Upės g. 21, Vilnius,
LT-0812
LIZ
MS
100
100
2,149
2,149
SIA Hortus Residential
40103460622
Latvia, Riga, Republikas
laukums 2A
PLS
MS
100
100
859
670
AS CBL Atklātais Pensiju
Fonds
40003397312
Latvia, Riga, Republikas
laukums 2A
PFO
MS
100
100
646
646
OU Citadele Factoring
10925733
Estonia, Tallinn 10152, Narva
mnt. 63/1
LIZ
MS
100
100
445
445
SIA Mobilly (Investments in
associates accounted for
using the equity method)
40003654405
Latvia, Dzirnavu iela 91 k-3 -
20, Rīga, LV-1011
ENI
CT
12.5
12.5
279
274
SIA Hortus Land (liquidated)
40103460961
Latvia
PLS
MS
100
100
-
8
SIA CL Insurance Broker
40003983430
Latvia, Riga, Republikas
laukums 2A
PLS
MMS
100
100
-
-
AAS CBL Life
40003786859
Latvia, Riga, Republikas
laukums 2A
APS
MMS
100
100
-
-
Total net investments in subsidiaries and associated entities
77,087
46,756
On 1 April 2021 the legal name of the Swiss registered banking subsidiary AP Anlage & Privatbank AG was changed to Kaleido
Privatbank AG. Similarly, in the reporting period SIA Citadele Līzings un Faktorings was renamed to SIA Citadele Factoring, UAB
Citadele faktoringas ir lizingas was renamed to UAB Citadele Factoring and OU Citadele Leasing & Factoring was renamed to OU
Citadele Factoring.
Consolidation Group subsidiaries in liquidation process in foreign jurisdictions
Company
Registration
number
Registration address
and country
Company
type*
Basis for
inclusion in
the Group**
The
Group’s
share
(%)
% of total
voting
rights
Carrying value
EUR thousands
31/12/2021
31/12/2020
OOO Mizush Asset
Management Ukraina (in
liquidation)
32984601
Ukraine
IBS
MMS
100
100
-
-
*BNK – bank, ENI – authorized electronic money institution, IBS – investment brokerage company, IPS – investment management company, PFO –
pension fund, CFI – other financial institution, LIZ – leasing company, PLS – company providing various support services, APS – insurance company.
** MS – subsidiary company, MMS – subsidiary of the subsidiary company, MT – parent company, MTM – parent of the parent company, CT – other
company.
OOO Mizush Asset Management Ukraina is in liquidation as this Group subsidiaries had no ongoing business operations. For OOO
Mizush Asset Management Ukraina a liquidator (AA PricewaterhouseCoopers Legal) has been appointed. The final tax audit has
been completed. The final report is being prepared and will be submitted as per statutory requirement; in due time a formal liquidation
decision from the statutory register is expected.
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 49
NOTE 20. TANGIBLE AND INTANGIBLE ASSETS
EUR thousands
31/12/2021
31/12/2020
31/12/2021
31/12/2020
Group
Group
Bank
Bank
Transport vehicles
7,653
144
58
98
Right-of-use assets
6,774
7,360
6,522
8,881
IT and other equipment
4,409
3,368
3,308
3,329
Leasehold improvements
1,318
1,194
1,318
1,194
Land and buildings
290
864
290
641
Total tangible assets
20,444
12,930
11,496
14,143
Software
7,088
5,042
4,995
4,923
Other intangible assets
163
127
107
127
Prepayments for intangible assets
1,311
812
981
782
Total intangible assets
8,562
5,981
6,083
5,832
Total tangible and intangible assets
29,006
18,911
17,579
19,975
In 2020 Group’s Latvian headquarters building with a carrying value of EUR 36.8 million was sold to Lords LB Baltic Green Fund (V).
Several sections of the building qualify for a lease-back transaction, therefore, requiring deferral of recognition of some sales gains.
The deferred sales gain of EUR 1.7 million is being recognised over the estimated lease-back period as a deduction from depreciation
expense of the lease-back right of use asset. In total in 2020 a sales gain of EUR 18.4 million was registered with EUR 16.7 million
qualifying as sales-day profits of the Group. The deferred part is allocated to the lease-back right of use asset. The sales decision
was a result of a review of the Group’s expected future office needs, assessment of several potential buyers’ proposals and
acknowledgment that the dynamics of office space are changing. Before the sales transaction, own use part of the building in the
Group’s accounts was classified as Land and buildings while the remainder as Investment properties (held for capital appreciation
and rental income). Also, in 2020 Group’s Lithuanian headquarters building with a carrying value of EUR 1.9 million was sold. A profit
of EUR 0.8 million was recognised on the sale.
Changes in tangible and intangible assets of the Group
Leasehold
improve-
ments
Land and
buildings
Trans-
port
vehicles
Right-of-
use
assets
Invest-
ment
proper-
ties
IT and
other
equipment
Software
Other
intangible
assets
Total
excluding
prepayments
Historical cost
As at 31 December 2019
1,168
53,086
762
3,087
18,273
23,244
24,754
351
124,725
Additions
813
4
9
8,901
-
1,149
2,522
3
13,401
Disposals and write-offs
(62)
(51,424)
(228)
(4,628)
(18,273)
(9,245)
-
(50)
(83,910)
As at 31 December 2020
1,919
1,666
543
7,360
-
15,148
27,276
304
54,216
Additions
634
13
11,371
5,703
-
3,828
6,146
124
27,819
Disposals and write-offs
(275)
(650)
(1,592)
(6,289)
-
(2,501)
(128)
(71)
(11,506)
As at 31 December 2021
2,278
1,029
10,322
6,774
-
16,475
33,294
357
70,529
Accumulated depreciation
As at 31 December 2019
505
21,778
519
-
7,751
19,118
20,142
202
70,015
Charge for the year
277
1,982
87
1,989
124
1,469
2,092
24
8,044
Disposals
(57)
(23,300)
(207)
(1,989)
(7,875)
(8,818)
-
(49)
(42,295)
As at 31 December 2020
725
460
399
-
-
11,769
22,234
177
35,764
Charge for the year
426
29
1,634
3,334
-
1,569
3,284
75
10,351
Incl. assets under
operating lease (Note 8)
-
-
1,578
-
-
-
-
-
1,578
Acquisition
32
1,209
-
1,109
763
14
3,127
Disposals
(223)
(92)
(573)
(3,334)
-
(2,392)
(75)
(72)
(6,761)
As at 31 December 2021
960
397
2,669
-
-
12,055
26,206
194
42,481
Impairment allowance
As at 31 December 2019
-
-
-
-
-
-
(113)
-
(113)
Net reversal and write-offs
-
(342)
-
-
-
(11)
113
-
(240)
As at 31 December 2020
-
(342)
-
-
-
(11)
-
-
(353)
Net reversal and write-offs
-
-
-
-
-
-
-
-
-
As at 31 December 2021
-
(342)
-
-
-
(11)
-
-
(353)
Net carrying amount
As at 31 December 2019
663
31,308
243
3,087
10,522
4,126
4,499
149
54,597
As at 31 December 2020
1,194
864
144
7,360
-
3,368
5,042
127
18,099
As at 31 December 2020
1,318
290
7,653
6,774
-
4,409
7,088
163
27,695
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 50
Changes in tangible and intangible assets of the Bank
Leasehold
improve-
ments
Land and
buildings
Trans-
port
vehicles
Right-of-
use
assets
Invest-
ment
proper-
ties
IT and
other
equipment
Software
Other
intangible
assets
Total
excluding
prepayments
Historical cost
As at 31 December 2019
1,040
4,006
553
10,811
-
15,237
23,939
286
55,872
Additions
813
-
9
8,901
-
1,077
2,525
3
13,328
Disposals and write-offs
(62)
(2,578)
(195)
(10,831)
-
(1,448)
-
(49)
(15,163)
As at 31 December 2020
1,791
1,428
367
8,881
-
14,866
26,464
240
54,037
Additions
539
13
-
1,368
-
1,293
2,632
-
5,845
Disposals and write-offs
(52)
(412)
(123)
(3,727)
-
(1,919)
(52)
-
(6,285)
As at 31 December 2021
2,278
1,029
244
6,522
-
14,240
29,044
240
53,597
Accumulated depreciation
As at 31 December 2019
397
1,051
392
-
-
11,576
19,555
140
33,111
Charge for the year
257
35
57
4,003
-
1,329
1,986
21
7,688
Disposals
(57)
(641)
(180)
(4,003)
-
(1,368)
-
(48)
(6,297)
As at 31 December 2020
597
445
269
-
-
11,537
21,541
113
34,502
Charge for the year
412
28
32
3,328
-
1,288
2,508
20
7,616
Disposals
(49)
(76)
(115)
(3,328)
-
(1,893)
-
-
(5,461)
As at 31 December 2021
960
397
186
-
-
10,932
24,049
133
36,657
Impairment allowance
As at 31 December 2019
-
-
-
-
-
-
-
-
-
Net reversal and write-offs
-
(342)
-
-
-
-
-
-
(342)
As at 31 December 2020
-
(342)
-
-
-
-
-
-
(342)
Net reversal and write-offs
-
-
-
-
-
-
-
-
-
As at 31 December 2021
-
(342)
-
-
-
-
-
-
(342)
Net carrying amount
As at 31 December 2019
643
2,955
161
10,811
-
3,661
4,384
146
22,761
As at 31 December 2020
1,194
641
98
8,881
-
3,329
4,923
127
19,193
As at 31 December 2020
1,318
290
58
6,522
-
3,308
4,995
107
16,598
NOTE 21. OTHER ASSETS
EUR thousands
31/12/2021
31/12/2020
31/12/2021
31/12/2020
Group
Group
Bank
Bank
Money in transit
19,474
10,383
19,424
10,383
Repossessed assets
2,118
3,945
-
-
Deferred expenses and accrued income (maturing in
less than 12 months from the period end)
10,629
6,719
6,062
2,719
Other assets
8,438
5,414
4,893
4,603
Total gross other assets
40,659
26,461
30,379
17,705
Impairment allowance
(1,542)
(1,433)
(1,467)
(1,350)
Total net other assets
39,117
25,028
28,912
16,355
As at 31 December 2021 and 2020 most of the impairment allowance for other assets relate to fully impaired overdue debt collection
expenditure compensation receivable; net carrying amount of these assets is nil. As at 31 December 2021, the Group had no
unimpaired delayed other assets (2020: EUR nil).
From time to time the Group repossesses from its customers certain assets serving as collateral, when the customers cannot otherwise
meet their payment obligations and other loan work-out measures have been unsuccessful. Collateral obtained is recognised within
other assets and are held for sale in near future. Real estate constitutes EUR 2.1 million of the repossessed assets as of 31 December
2021 (2020: EUR 3.8 million). Total net carrying value of the collateral obtained during the reporting period and still held at the end of
the reporting period is EUR 0.2 million (2020: EUR 0.5 million). Other repossessed collaterals held at the end of the reporting period
are from earlier periods.
Repossessed assets where the management has committed to an active plan that is expected to result in a complete sale within one
year from the date of classification are classified as non-current assets held for sale.
NOTE 22. DEPOSITS FROM CREDIT INSTITUTIONS AND CENTRAL BANKS
Bank deposits and borrowings by type
EUR thousands
31/12/2021
31/12/2020
31/12/2021
31/12/2020
Group
Group
Bank
Bank
ECB's targeted longer-term refinancing operations
475,810
438,833
475,810
438,833
Deposits from Citadele Group banks
-
-
20,393
20,968
Other credit institution deposits and collateral
accounts
3,419
11,153
3,419
11,153
Other central bank deposits and accounts
6
5
6
5
Total deposits from credit institutions and
central banks
479,235
449,991
499,628
470,959
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 51
On 24 June 2020, Citadele participated in the ECB's latest targeted longer-term refinancing operations (TLTRO-III) borrowing EUR
440 million. The maturity date of the facility is 28 June 2023 with an early repayment option starting on 29 September 2021. In June
2021 TLTRO-III borrowing was increased by EUR 40 million. From 24 June 2020 a basic interest rate on TLTRO-III borrowing has
been -0.5%. The interest rate is linked to a reference rate which may change in the future. For banks meeting the ECB’s specified
lending criteria, which Citadele has met for the reference periods up to 31 December 2021, the interest rate can be as low as -1.0%
and is applicable retrospectively. Based on an internal assessment, part of the inflow of economic benefits from TLTRO-III borrowing
with negative effective interest rate, which may be justified as market rate, is recognised within interest income. The remainder is a
benefit of the below-market rate of interest and is recognised within other income as a support or compensation for the fulfilment of
the required obligations and supporting customer needs.
Due to Citadele meeting specified lending criteria and thus qualifying for -1.0% interest rate, instead of -0.5%, in the reporting period
EUR 0.7 million was recognised as an additional interest income and EUR 2.7 million as a support for the fulfilment of the required
government obligations.
NOTE 23. DEPOSITS AND BORROWINGS FROM CUSTOMERS
Deposits and borrowings by profile of the customer
EUR thousands
31/12/2021
31/12/2020
31/12/2021
31/12/2020
Group
Group
Bank
Bank
Households
2,048,986
2,095,185
2,001,336
1,992,892
Non-financial corporations
1,493,271
1,280,670
1,386,755
1,187,775
Financial corporations
214,207
228,679
220,034
230,572
General government
44,682
49,576
44,682
49,576
Other
12,717
17,280
12,717
17,281
Total deposits from customers
3,813,863
3,671,390
3,665,524
3,478,096
Deposits and borrowings from customers by contractual maturity
EUR thousands
31/12/2021
31/12/2020
31/12/2021
31/12/2020
Group
Group
Bank
Bank
Demand deposits
3,464,832
3,015,900
3,366,093
2,873,767
Term deposits due within:
less than 1 month
61,678
100,229
58,141
94,722
more than 1 month and less than 3 months
60,500
130,020
51,867
124,224
more than 3 months and less than 6 months
37,064
53,559
27,036
47,918
more than 6 months and less than 12 months
128,875
255,437
122,432
250,857
more than 1 year and less than 5 years
51,452
105,619
36,521
81,248
more than 5 years
9,462
10,626
3,434
5,360
Total term deposits
349,031
655,490
299,431
604,329
Total deposits from customers
3,813,863
3,671,390
3,665,524
3,478,096
Deposits and borrowings from customers by categories
EUR thousands
31/12/2021
31/12/2020
31/12/2021
31/12/2020
Group
Group
Bank
Bank
At amortised cost
3,774,118
3,635,380
3,665,524
3,478,096
At fair value through profit or loss
39,745
36,010
-
-
Total deposits from customers
3,813,863
3,671,390
3,665,524
3,478,096
Including unit-linked insurance plan liabilities
25,772
21,629
-
-
All the Group deposits from customers classified at fair value through profit or loss relate to the Group’s life insurance business. It is
the deposit component of the insurance plans. All unit-linked insurance plan liabilities are covered by financial assets designated at
fair value through profit or loss. According to unit-linked investment contract terms, the risk associated with the investments made by
the insurance underwriter is fully attributable to the counterparty entering the insurance agreement and not the underwriter.
NOTE 24. DEBT SECURITIES ISSUED
Publicly listed debt securities
ISIN code of the
issued bond
Eligibility
Currency
Interest
rate
Initial
maturity
date
Principal,
EUR
thousands
Amortised cost,
EUR thousands
31/12/2021
31/12/2020
XS2393742122
MREL eligible
EUR
1.625%
22/11/2026
200,000
198,714
-
LV0000880102
Subordinated
EUR
5.00%
13/12/2031
40,000
40,104
-
LV0000880011
Subordinated
EUR
5.50%
24/11/2027
20,000
20,077
20,070
LV0000802221
Subordinated
EUR
6.25%
06/12/2026
40,000
-
40,010
258,895
60,080
Unsecured subordinated securities qualify for inclusion in the Bank’s and the Group’s Tier 2 capital. For details on capital adequacy
refer to Capital management section of the Note 33 (Risk Management).
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 52
Redemption of subordinated bonds
In the beginning of December 2021, after obtaining all necessary regulatory approvals, AS Citadele Banka early redeemed
subordinated bond liabilities (LV0000802221) of EUR 40 million. The early redemption right was exercised in order to maintain
effective Citadele Group’s Tier 2 capital structure.
Issuance of subordinated bonds and MREL eligible senior unsecured bonds
On 17 November 2021, AS Citadele Banka completed issuance of EUR 200 million of senior unsecured preferred bonds
(XS2393742122). The bonds were issued with five years maturity, with issuer’s optional redemption date after four years. The purpose
of the issuance is to meet Minimum Requirement for own funds and Eligible Liabilities (MREL). The senior unsecured preferred bonds
were offered to institutional investors. In total almost 40 investors participated in the offering. Out of total order book 59% was received
from Nordic and Baltic investors, 27% from UK and 14% from investors of other European countries. The bonds were issued at a
spread of 185 basis points over the mid-swap rate. The new security was priced with a coupon of 1.625%. The bonds are listed on
Euronext Dublin and Nasdaq Riga. As of the issuance date, the bonds are rated Baa3 by Moody’s.
On 10 December 2021 AS Citadele banka completed an oversubscribed issuance of EUR 40 million bonds (LV0000880102) in the
local Baltic market by this contributing to the development of the Baltic capital markets. The bonds were issued with ten years maturity,
with issuer’s optional redemption date after five years and with fixed interest rate of 5% per annum. The purpose of this issuance was
to further improve Citadele’s capital adequacy ratio as well as to refinance the previous outstanding subordinated bonds issued in
2016. Citadele aims to strengthen the bank’s capital position and to support the bank’s ongoing growth strategy providing active
lending to small and medium sized enterprises. The unsecured subordinated bonds were offered to institutional and retail investors in
Latvia, Lithuania and Estonia, as well as institutional investors located in the Member State of the EEA. Out of total order book 52%
was received from investors in Latvia, 20% from Lithuania, 19% from Estonia and 9% from other EU countries.
Profile of the bondholders as of the last coupon payment date of the subordinated bonds
ISIN code of the
issued bond
Last coupon or
origination
date
Number of
bondholders
Legal and professional
investors
Private individuals
Number
EUR th.
%
Number
EUR th.
%
LV0000880102
13/12/2021
146
45
27,250
68%
101
12,750
32%
LV0000880011
24/05/2021
76
42
16,780
84%
34
3,220
16%
NOTE 25. OTHER LIABILITIES
Publicly listed debt securities
EUR thousands
31/12/2021
31/12/2020
31/12/2021
31/12/2020
Group
Group
Bank
Bank
Insurance reserves:
Annuity pension products
41,492
30,940
-
-
Unearned premiums – life insurance
118
93
-
-
Unearned premiums – other insurance
48
55
-
-
IBNR, RBNS and other
19
42
-
-
Payables to lease suppliers
19,155
-
-
-
Employee related accruals
12,218
6,498
8,640
6,342
Other accrued expenses
8,348
7,836
5,417
5,006
Lease liabilities
7,614
8,769
6,529
8,699
Regulatory fee and similar accruals
1,876
2,182
1,876
2,182
Other liabilities
9,359
7,783
3,014
4,774
Total other liabilities
100,247
64,198
25,476
27,003
Insurance liabilities mostly comprise estimated present value of future cash outflows from defined benefit annuity pension products
sold to customers by AAS CBL Life. The annuity products are subject to terms, conditions and limitations. Estimated cash outflows
are conditional to life longevity assumptions and defined benefit payment structure. Most of the defined payments are due within five
years period.
NOTE 26. SHARE CAPITAL
The Bank has one class ordinary shares. As of the period end, the Bank’s registered and authorised share capital was EUR
159,344,468 (2020: EUR 158,511,384). From the total registered capital EUR 156,888,384 (2020: EUR 156,555,796) were issued
and fully paid while EUR 2,456,084 (2020: EUR 1,955,588) were registered as conditional capital. The conditional capital represents
the maximum number of shares that may be allocated for awarding to employees as share options. No dividends were proposed and
paid during the reporting period. Each ordinary share carries one vote, a share in profits and is eligible for dividends.
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 53
Shareholders of the Bank
31/12/2021
31/12/2020
Paid-in share
capital
(EUR)
Total shares
with voting
rights
Paid-in share
capital
(EUR)
Total shares
with voting
rights
European Bank for Reconstruction and Development
39,138,948
39,138,948
39,138,948
39,138,948
RA Citadele Holdings LLC
1
42,772,216
42,772,216
35,082,302
35,082,302
Delan S.à.r.l.
2
15,597,160
15,597,160
15,597,160
15,597,160
EMS LB LLC
3
15,577,301
15,577,301
13,864,142
13,864,142
NNS Luxembourg Investments S.à.r.l.
-
-
13,864,142
13,864,142
Amolino Holdings Inc.
4
15,639,924
15,639,924
13,863,987
13,863,987
Shuco LLC
5
12,297,697
12,297,697
10,998,979
10,998,979
Members of the Management Board of the Bank
302,732
302,732
-
-
Other shareholders
15,562,406
15,562,406
14,146,136
14,146,136
Total
156,888,384
156,888,384
156,555,796
156,555,796
1
RA Citadele Holdings LLC (United States) is a wholly owned subsidiary of Ripplewood Advisors LLC and is beneficially owned by
Mr Timothy Collins
2
Delan S.à.r.l. is beneficially owned by the Baupost Group LLC
3
EMS LB LLC is beneficially owned by Mr Edmond M. Safra
4
Amolino Holdings Inc. is beneficially owned by Mr James L. Balsilie
5
Shuco LLC is beneficially owned by Mr Stanley S. Shuman
In the reporting period 332,588 share options, previously awarded to the employees of the Bank, vested. All options were exercised
on the vesting date, from these 302,732 were exercised by the Members of the Management Board of the Bank.
Earnings per share
Basic earnings per share are calculated by dividing the net profit that is attributable to the ordinary shareholders by the weighted
average number of the ordinary shares outstanding during the period. Diluted earnings per share are determined by adjusting the net
profit that is attributable to the ordinary shareholders and the weighted-average number of the ordinary shares outstanding for the
effects of all dilutive potential ordinary shares, which comprise share options granted to employees in the long-term incentive
programs. The part of the performance-based employee share options for which the services under the approved long-term incentive
programs have been received are included in the calculation of diluted earnings per share. The remaining part of the performance-
based employee share options, issuance of which is contingent upon satisfying specific conditions, in addition to the passage of time,
are treated as contingently issuable shares and are not included in the calculation of diluted earnings per share.
12m 2021
12m 2020
12m 2021
12m 2020
Group
Group
Bank
Bank
Profit for the period, EUR thousands
55,045
3,608
29,643
(4,761)
Weighted average number of the ordinary shares
outstanding during the period in thousands
156,722
156,556
156,722
156,556
Basic earnings per share in EUR
0.35
0.02
0.19
(0.03)
Weighted average number of the ordinary shares
(basic) outstanding during the period in thousands
156,722
156,556
156,722
156,556
Effect of share options in issue in thousands
1,095
886
1,095
886
Weighted average number of the ordinary shares
(diluted) outstanding during the period in
thousands
157,817
157,442
157,817
157,442
Profit for the period, EUR thousands
55,045
3,608
29,643
(4,761)
Weighted average number of the ordinary shares
(diluted) outstanding during the period in thousands
157,817
157,442
157,817
157,442
Diluted earnings per share in EUR
0.35
0.02
0.19
(0.03)
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 54
NOTE 27. OFF-BALANCE SHEET ITEMS
Off-balance sheet items comprise contingent liabilities, financial commitments, notional amounts payable or receivable from
transactions with foreign exchange contracts and other derivative financial instruments.
Contingent liabilities and financial commitments outstanding
EUR thousands
31/12/2021
31/12/2020
31/12/2021
31/12/2020
Group
Group
Bank
Bank
Contingent liabilities:
Outstanding guarantees
17,333
18,138
21,932
17,481
Outstanding letters of credit with public
5,002
4,331
5,001
4,331
Contingent liabilities with credit institutions
11,930
1,434
11,930
1,434
Total contingent liabilities
34,265
23,903
38,863
23,246
Provisions for credit risk
(229)
(142)
(229)
(142)
Maximum credit risk exposure for guarantees and
letters of credit
34,036
23,761
38,634
23,104
Financial commitments:
Card commitments
122,102
124,135
122,118
124,140
Unutilised credit lines and overdraft facilities
66,443
50,723
166,571
88,818
Loans granted, not fully drawn down
145,566
63,131
142,376
63,131
Factoring commitments
53,488
22,665
-
-
Other commitments
344
396
-
-
Total financial commitments
387,943
261,050
431,065
276,089
Provisions for financial commitments
(3,605)
(1,969)
(3,552)
(1,891)
Maximum credit risk exposure for financial
commitments
384,338
259,081
427,513
274,198
Lending commitments are a time limited and binding promise that a specified amount of loan or credit line will be made available to
the specific borrower on specific pre-agreed terms. For part of the committed lending promises clients have to perform certain
obligations before the balance committed becomes available to them. Some lending commitments and undrawn credit facilities may
be cancelled unconditionally by the Group at any time without notice, or in accordance with lending terms and conditions may
effectively provide for automatic cancellation due to deterioration in a borrower's creditworthiness.
Notional amounts and fair values of derivatives of the Group
Notional amount
Fair value
EUR thousands
EUR thousands
31/12/2021
31/12/2020
31/12/2021
31/12/2020
Assets
Liabilities
Assets
Liabilities
Foreign exchange contracts:
Swaps
278,049
253,819
3,989
(614)
1,152
(4,124)
Forwards
12,842
24,661
314
(125)
322
(337)
Total foreign exchange contracts
290,891
278,480
4,303
(739)
1,474
(4,461)
Derivatives
290,891
278,480
4,303
(739)
1,474
(4,461)
Notional amounts and fair values of derivatives of the Bank
Notional amount
Fair value
EUR thousands
EUR thousands
31/12/2021
31/12/2020
31/12/2021
31/12/2020
Assets
Liabilities
Assets
Liabilities
Foreign exchange contracts:
Swaps
278,049
253,819
3,989
(614)
1,152
(4,124)
Forwards
12,842
24,661
314
(125)
322
(337)
Total foreign exchange contracts
290,891
278,480
4,303
(739)
1,474
(4,461)
Derivatives
290,891
278,480
4,303
(739)
1,474
(4,461)
The Group’s banks use derivative foreign exchange instruments to manage their currency positions, which arise also due to derivative
foreign exchange contracts concluded with the banks’ clients. Before entering into derivative foreign currency agreement with a private
individual or a company, the Group’s entities assess the counterparty’s ability to meet the contractual provisions. As at 31 December
2021, 2% (2020: 29%) of the fair value of derivative assets on foreign exchange contracts is attributable to credit and finance
institutions. As at 31 December 2021, none (2020: nil) of the receivables arising out of derivative transactions were past due.
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 55
NOTE 28. ASSETS UNDER MANAGEMENT
Fair value of assets managed on behalf of customers by investment type
EUR thousands
31/12/2021
31/12/2020
31/12/2021
31/12/2020
Group
Group
Bank
Bank
Fixed income securities:
Corporate bonds
193,845
206,766
-
-
Government bonds
71,233
68,552
-
-
Credit institution bonds
54,083
30,566
-
-
Other financial institution bonds
22,477
21,787
-
-
Total investments in fixed income securities
341,638
327,671
-
-
Other investments:
Investment funds
641,845
485,557
-
-
Deposits with credit institutions
1,005
61,923
-
-
Compensations for distribution on behalf of deposit
guarantee fund
12,049
17,284
12,049
17,284
Shares
116,175
71,771
-
-
Real estate
4,820
4,247
-
-
Loans
631
681
631
681
Other
31,777
91,774
-
-
Total other investments
808,302
733,237
12,680
17,965
Total assets under management
1,149,940
1,060,908
12,680
17,965
Customer profile on whose behalf the funds are managed
EUR thousands
31/12/2021
31/12/2020
31/12/2021
31/03/2020
Group
Group
Bank
Bank
Pension plans
814,908
745,174
-
-
Insurance companies, investment and pension funds
187,750
161,338
-
-
Other companies and government
19,397
54,057
12,680
17,965
Private individuals
127,885
100,339
-
-
Total liabilities under management
1,149,940
1,060,908
12,680
17,965
In 2020 the Group acquired rights to manage 2
nd
tier Latvian pension investment plans of the former AS PNB banka. As a result of
this acquisition assets under management of the Group increased by more than EUR 100 million. To achieve economies of scale, the
above PNB pension investment plans in October 2021 were merged with existing CBL pension investment plans. Management right
asset in the amount of consideration paid was recognised by the Group and will be amortised to expenses proportionally to the
acquired asset expected management income streams.
NOTE 29. FINANCIAL ASSETS PLEDGED
EUR thousands
31/12/2021
31/12/2020
31/12/2021
31/12/2020
Group
Group
Bank
Bank
Loans to credit institutions
353
1,802
-
1,470
Debt securities
526,755
461,670
524,996
459,965
Loans to customers and other assets
7,558
9,374
7,558
9,374
Total financial assets pledged
534,666
472,846
532,554
470,809
Total liabilities secured by pledged assets
475,810
438,833
475,810
438,833
All pledged amounts consist of placements to secure various Bank’s and Group’s transactions in the ordinary course of business. As
at the period end, substantial part of the collateral is placed with the Bank of Latvia to secure EUR 480 million financing in the ECB's
latest targeted longer-term refinancing operations (TLTRO-III). For details on TLTRO-III financing received refer to Note 22 (Deposits
from Credit Institutions and Central Banks).
NOTE 30. CASH AND CASH EQUIVALENTS
EUR thousands
31/12/2021
31/12/2020
31/12/2021
31/12/2020
Group
Group
Bank
Bank
Cash and cash balances with central banks
371,025
1,146,606
361,626
1,131,008
Loans on demand to credit institutions
36,743
31,018
13,710
20,019
Demand deposits from central banks and credit
institutions
(3,425)
(1,074)
(11,670)
(2,830)
Total cash and cash equivalents
404,343
1,176,550
363,666
1,148,197
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 56
NOTE 31. FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES
Fair value is the price that would be received for an asset sold or paid to transfer a liability in an orderly transaction between market
participants at the measurement date in the principal, or in its absence, the most advantageous market to which the Group has access
at that date. The fair value of a liability reflects its non-performance risk.
For illiquid financial assets and liabilities, including loans and advances to customers, there are no active markets. Accordingly, fair
value for these has been estimated using appropriate valuation techniques. The methods used to determine the fair value of balance
sheet items are as follows:
Cash and balances at central banks
The fair value of cash and balances with central banks is their carrying amount as these balances may be withdrawn without notice.
Loans to credit institutions and deposits from credit institutions and central banks
The fair value of on-demand balances with credit institutions is their carrying amount as these balances may be withdrawn without
notice. The fair value of overnight placements is their carrying amount. The fair value of other amounts due from banks is calculated
by discounting expected cash flows using current market rates. The carrying value is a close representation of fair value due to short-
term maturity profiles and low interest rates.
Loans to public
The fair value of loans and advances to customers is calculated by discounting expected future cash flows. The discount rate is the
sum of money market rate as of the end of the reporting period and credit margin, which is adjusted for current market conditions. If
all the Bank’s assumed discount rates would change by 10%, the fair value of the loan portfolio would change by EUR 21.1 million
(2020: EUR 16.4 million).
Debt securities
Debt securities classified as at fair value through profit or loss and at fair value through other comprehensive income are accounted
at unadjusted quoted prices in active markets which is their fair value. Debt securities classified at amortised cost are not accounted
at fair value; the disclosed fair value for these is their unadjusted quoted prices in active markets.
Equity instruments and other financial instruments at fair value
Investments in mutual investment funds (presented as other financial instruments at fair value) are valued using unadjusted quoted
prices in active markets.
Equity instruments include Visa Inc. preferred C shares which have been valued by reference to consideration, which is contingent
upon future events. The valuation is dependent on exchange rate, Visa Inc. stock price and preferred stocks’ conversion ratio as well
as liquidity discount. The instrument is categorised as Level 3. If the applied liquidity discount was decreased by 1000bp, the estimated
fair value would increase by EUR 0.4 million as of 31 December 2021 (2020: EUR 0.4 million).
Derivatives
Derivatives are valued using techniques based on observable market data.
Deposits and borrowings from customers
Deposits and borrowing from customers include part which is carried at amortised cost and part which is carried at fair value. The
entire portfolio of deposits and borrowing from customers which is carried at fair value is the deposit part of the life insurance contracts.
The fair value of deposits and borrowings from customers repayable on demand is their carrying amount. The fair value of other
deposits is calculated by discounting expected cash flows using average market interest rates close to or at the period-end. If all the
assumed discount rates would change by 10%, the fair value of the non-subordinated non-life insurance deposit portfolio would
change by EUR 0.03 million (2020: EUR 0.10 million).
The fair value of unit-linked investment contract liabilities is their carrying amount which equals fair value of unit-linked insurance plan
assets. The fair value of other life insurance deposits carried at fair value through profit or loss is calculated by discounting expected
cash flows using current effective deposit rates. If the assumed discount rates would change by +/-50bp, the fair value of the portfolio
would decrease by EUR -71/+68 thousand.
The fair value of unit-linked investment contract liabilities is their carrying amount which equals fair value of unit-linked insurance plan
assets. The fair value of other life insurance deposits carried at fair value through profit or loss is calculated by discounting expected
cash flows using current effective deposit rates.
Debt securities issued
The fair value of publicly listed unsecured subordinated bonds is estimated based on the quoted prices.
Fair value hierarchy
Quoted market prices (Level 1)
Financial instruments are valued using unadjusted quoted prices in active markets.
Valuation technique - observable market inputs (Level 2)
Financial instruments are valued using techniques based on observable market data. In some instances, valuations received from
independent third party are used.
Valuation technique - non-market observable inputs (Level 3)
Financial instruments are valued using techniques for which significant inputs are not based on observable market data.
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 57
Fair values of financial assets and liabilities of the Group on 31 December 2021
Fair value hierarchy (where applicable)
Carrying
value
Total fair
value
Quoted
market prices
Valuation
technique -
observable
inputs
Valuation
technique –
non-market
observable
inputs
Financial assets measured at fair value:
Debt securities
340,701
340,701
257,464
83,237
-
Equity instruments
1,279
1,279
-
-
1,279
Other financial instruments
42,032
42,032
42,032
-
-
Derivatives
4,303
4,303
-
4,303
-
Financial assets not measured at fair value:
Cash and balances at central banks
371,025
371,025
-
-
-
Loans to credit institutions
58,742
58,742
-
-
-
Debt securities
1,461,019
1,463,194
1,304,631
139,075
19,488
Loans to public
2,701,509
2,712,632
-
-
2,712,632
Total assets
4,980,610
4,993,908
1,604,127
226,615
2,733,399
Financial liabilities measured at fair value:
Derivatives
739
739
-
739
-
Deposits and borrowings from customers
39,745
39,745
25,772
-
13,973
Financial liabilities not measured at fair value:
Deposits from credit institutions and central
banks
479,235
479,235
-
-
-
Deposits and borrowings from customers
3,774,118
3,775,140
-
-
3,775,140
Debt securities issued
258,895
259,344
-
259,344
-
Total liabilities
4,552,732
4,554,203
25,772
260,083
3,789,113
Fair values of financial assets and liabilities of the Group on 31 December 2020
Fair value hierarchy (where applicable)
Carrying
value
Total fair
value
Quoted
market prices
Valuation
technique -
observable
inputs
Valuation
technique –
non-market
observable
inputs
Financial assets measured at fair value:
Debt securities
376,974
376,974
376,974
-
-
Equity instruments
4,764
4,764
-
3,516
1,248
Other financial instruments
43,343
43,343
43,343
-
-
Derivatives
1,474
1,474
-
1,474
-
Financial assets not measured at fair value:
Cash and balances at central banks
1,146,606
1,146,606
-
-
-
Loans to credit institutions
51,287
51,287
-
-
-
Debt securities
1,383,216
1,400,002
1,389,587
-
10,415
Loans to public
1,541,223
1,561,421
-
-
1,561,421
Total assets
4,548,887
4,585,871
1,809,904
4,990
1,573,084
Financial liabilities measured at fair value:
Derivatives
4,461
4,461
-
4,461
-
Deposits and borrowings from customers
36,010
36,010
21,629
-
14,381
Financial liabilities not measured at fair value:
Deposits from credit institutions and central
banks
449,991
449,991
-
-
-
Deposits and borrowings from customers
3,635,380
3,638,069
-
-
3,638,069
Debt securities issued
60,080
61,775
-
61,775
-
Total liabilities
4,185,922
4,190,306
21,629
66,236
3,652,450
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 58
Fair values of financial assets and liabilities of the Bank on 31 December 2021
Fair value hierarchy (where applicable)
Carrying
value
Total fair
value
Quoted
market prices
Valuation
technique -
observable
inputs
Valuation
technique –
non-market
observable
inputs
Financial assets measured at fair value:
Debt securities
233,166
233,166
161,592
71,574
-
Equity instruments
1,279
1,279
-
-
1,279
Other financial instruments
7,400
7,400
7,400
-
-
Derivatives
4,303
4,303
-
4,303
-
Financial assets not measured at fair value:
Cash and balances at central banks
361,626
361,626
-
-
-
Loans to credit institutions
35,693
35,693
-
-
-
Debt securities
1,419,142
1,420,473
1,269,110
131,875
19,488
Loans to public
2,609,713
2,620,836
-
-
2,620,836
Total assets
4,672,322
4,684,776
1,438,102
207,752
2,641,603
Derivatives measured at fair value
739
739
-
739
-
Financial liabilities not measured at fair value:
Deposits from credit institutions and central
banks
499,628
499,628
-
-
-
Deposits and borrowings from customers
3,665,524
3,666,588
-
-
3,666,588
Debt securities issued
258,895
259,344
-
259,344
-
Total liabilities
4,424,786
4,426,299
-
260,083
3,666,588
Fair values of financial assets and liabilities of the Bank on 31 December 2020
Fair value hierarchy (where applicable)
Carrying
value
Total fair
value
Quoted
market prices
Valuation
technique -
observable
inputs
Valuation
technique –
non-market
observable
inputs
Financial assets measured at fair value:
Debt securities
224,710
224,710
224,710
-
-
Equity instruments
4,764
4,764
-
3,516
1,248
Other financial instruments
13,834
13,834
13,834
-
-
Derivatives
1,474
1,474
-
1,474
-
Financial assets not measured at fair value:
Cash and balances at central banks
1,131,008
1,131,008
-
-
-
Loans to credit institutions
40,289
40,289
-
-
-
Debt securities
1,338,965
1,353,890
1,343,475
-
10,415
Loans to public
1,518,313
1,538,511
-
-
1,538,511
Total assets
4,273,357
4,308,480
1,582,019
4,990
1,550,174
Derivatives measured at fair value
4,461
4,461
-
4,461
-
Financial liabilities not measured at fair value:
Deposits from credit institutions and central
banks
470,959
470,959
-
-
-
Deposits and borrowings from customers
3,478,096
3,480,835
-
-
3,480,835
Debt securities issued
60,080
61,775
-
61,775
-
Total liabilities
4,013,596
4,018,030
-
66,236
3,480,835
Changes in fair value of securities accounted for at fair value and categorised as Level 3
EUR thousands
12m 2021
12m 2020
12m 2021
12m 2020
Group
Group
Bank
Bank
As of the beginning of the period, net
1,248
5,092
1,248
5,092
Total comprehensive income
Revaluation gain
31
515
31
515
Transfer to income statement on settlement
-
(3,359)
-
(3,359)
Transfer to associates accounted for using the equity
method
-
(1,000)
-
(1,000)
As of the end of the period, net
1,279
1,248
1,279
1,248
Fair value for equity instruments for which fair value is calculated based on non-market observable inputs is categorised as Level 3,
as these financial instruments are not listed on an exchange and there are insufficient recent observable transactions on the market.
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 59
Changes in fair value of deposits and borrowings from customers measured at fair value and categorised as Level 3
EUR thousands
12m 2021
12m 2020
Group
Group
Balance as at the beginning of the period
14,381
12,984
Premiums received
3,365
3,650
Commissions and risk charges
(383)
(377)
Paid to policyholders
(3,494)
(2,076)
Other
94
215
Currency revaluation result
10
(15)
Balance as at the end of the period
13,973
14,381
In the year ended 31 December 2021 from financial liabilities designated at fair value through profit or loss which are not unit-linked
the Group has recognised net revaluation result of EUR 53 thousand in the net financial income line of the statement of income (2020:
EUR -73 thousand). The amount of change in 2021 in the fair value of the financial liabilities that is attributable to changes in the credit
risk of the liabilities measured at fair value is EUR 63 thousand (2020: EUR 101 thousand). Most of the insurance business the Group
is involved in relates to investment contracts rather than insurance risk; therefore, premiums received are recognised as liabilities of
the Group since settlement in due course is expected. The amount of insurance risk generated by the Group currently is not significant
and, therefore, not further disclosed in detail in these financial statements.
NOTE 32. RELATED PARTIES
Related parties are defined as shareholders who have significant influence over the Group, members of the Supervisory Board and
Management Board, key Management personnel, their close relatives and companies in which they have a controlling interest as well
as the Group’s subsidiaries and associated companies. For the purpose of this disclosure, the key management of the Group and the
Bank and their related companies are stated in one line. All transactions with related parties were made on terms equivalent to those
that prevail in arm’s length transactions. Outstanding balances and terms of the Group’s and the Bank’s transactions in this note are
shown with related parties which were related parties at that time.
Assets and liabilities from transactions with related parties
EUR thousands
31/12/2021
31/12/2020
31/12/2021
31/12/2020
Group
Group
Bank
Bank
Credit exposures to related parties, net
Loans to public and credit institutions
Management
293
302
130
267
Consolidated subsidiaries
-
-
974,089
202,328
Investments in subsidiaries
-
-
76,808
46,482
Investments in associates
279
274
279
274
Other assets
12
-
126
61
Financial commitments and guarantees outstanding
6,215
100
216,401
38,153
Credit exposures to related parties, net
6,799
676
1,267,833
287,565
Liabilities to related parties
Deposits and borrowings from customers and credit
institutions
Management
1,137
1,116
1,137
1,019
Consolidated subsidiaries and associates
1,376
-
52,773
48,634
Other liabilities (including lease liabilities) and
provisions for expected credit losses
66
3
338
241
Liabilities to related parties
2,579
1,119
54,248
49,894
As at 31 December 2021 no assets with consolidated subsidiaries were credit impaired (2020: none). The recognised expected credit
losses on non-credit impaired loans from consolidated subsidiaries as at 31 December 2021 was EUR 1.28 million (2020: EUR 0.25
million).
In 2021 an increase of EUR 1.03 million in allowances for expected credit losses for loans from consolidated subsidiaries was
recognised (2020: EUR 0.15 million release of impairment loss allowance recognised). The increase in expected credit loss allowances
was primarily driven by EUR 771.8 million additional lending to subsidiaries to fund leasing and factoring business. The ultimate
recoverability of the loans issued to subsidiaries depends on the performance of the underlying business of the respective subsidiaries.
For information on investments in subsidiaries refer to Note 19 (Investments in Related Entities).
Income and expense from transactions with related parties
EUR thousands
2021
2020
2021
2020
Group
Group
Bank
Bank
Interest income
Management
13
12
11
10
Consolidated subsidiaries
-
-
16,943
4,167
Interest expense
Consolidated subsidiaries
-
-
(194)
(512)
Shareholders (EBRD)
(683)
-
-
-
Fee and commission income
102
4
2,079
981
Fee and commission expense
(5)
(2)
(5)
(4)
Net financial income
2
-
2
4
All other income
-
-
1,485
2,472
Administrative and other expense (excluding
management’s remuneration, Note 9)
(2,010)
(2,054)
(2,009)
(4,558)
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 60
For information on the management’s remuneration refer to Note 9 (Staff Costs). The Group’s and the Bank’s administrative expense
mostly relates to rent and utility fees paid to the Group’s companies and Advisory Services Agreement fee. The Bank has entered into
the Advisory Services Agreement with Ripplewood Advisors LLC, where Ripplewood is paid EUR 2.0 million per annum for the
services provided to the Bank. These advisory services include business plan development, strategic analysis, capital allocation, risk
advisory, operating efficiency, human resource management, and other services.
On acquisition data SIA UniCredit Leasing (in 2021 renamed to SIA Citadele Leasing) had a borrowing from European Bank for
Reconstruction and Development (EBRD). The interest expense to shareholders (EBRD) in 2021 represents the amounts paid for the
EBRD borrowing. The borrowed amounts were repaid fully to the EBRD during 2021.
NOTE 33. RISK MANAGEMENT
Risk management policies
The Group considers risk management to be an essential component of its management process. The Group believes that it pursues
prudent risk management policies that are aligned with its business and which aim to achieve effective risk mitigation. In order to
assess and monitor complex risk exposures, the Group applies a wide range of risk management tools in conjunction with risk
committees. Members of risk committees represent key operations of the Group in order to balance business and risk orientation
within respective risk committees. The Group’s risk management principles are set out in its Risk Management Policy. The Group
adheres to the following key risk management principles:
• The Group aims to ensure that it maintains low overall risk exposure, diversified asset portfolio, limited risks in financial
markets and low levels of operational risk;
• The Group aims to ensure an acceptable risk level in all operations. Risks are always assessed in relation to their expected
return. Risk exposures that are not acceptable are avoided, limited or hedged;
• The Group does not assume high or uncontrollable risks irrespective of the return they provide, and assumes risks only in
economic fields and geographical regions in relation to which it believes it has sufficient knowledge and expertise;
• Risk management is based on each Group’s employee’s responsibility for the transactions carried out by him/her and
awareness of the related risks;
• The risk limit system and strict controls are essential risk management elements. Control over risk levels and compliance
with the imposed limits is achieved by the existence of structured risk limit systems for all material risks.
The aim of the risk management in the Group is to facilitate the achievement of the Group’s goals, successful development, long-term
financial stability and to protect the Group from unidentified risks. Risk management within the Group is controlled by an independent
unit – the Risk Sector.
The main risks to which the Group is exposed are credit risk, market risk, interest rate risk, liquidity risk, currency risk and operational
risk. For each of these risks the Group has approved risk management policies and other internal regulations defining key risk
management principles and processes, functions and responsibilities of units, risk concentration limits, as well as control and reporting
system. The Group’s risk management policies for each of the above-mentioned risks are briefly summarised below.
Credit risk
Credit risk is the risk that the Group will incur a loss from debtor’s non-performance or default. The Group is exposed to credit risk in
its lending, investing and transaction activities, as well as in respect of the guarantees issued to or received from third parties and
other off-balance sheet commitments to third parties. Credit risk management is performed pursuant to the Credit Risk Management
Policy. The goal of credit risk management is to achieve a diversified asset portfolio which generates profits that correspond to the
assumed level of risk.
Credit risk management is based on an adequate assessment of a credit risk and a proper decision-making in relation to such risk. In
cases when significant risk is to be undertaken, the credit risk analysis is performed by independent units of the Risk Sector. The
credit risk analysis consists of an assessment of customer’s creditworthiness and collateral quality and liquidity. The analysis of a
legal entity’s creditworthiness includes an assessment of the industry in which it operates, as well as an analysis of its credit history
and current and forecasted financial situation. The assessment of a private individual’s creditworthiness consists of the analysis of its
credit history, income and debt-to-income ratio analysis, as well as an analysis of applicable social and demographic factors. In cases
of material risks, lending decisions are taken by the Credit Committee and approved by the Bank’s Management Board.
In relation to the acquisition of corporate bonds, the Group always analyses the business profile and financial performance of the
issuer, taking into consideration the credit ratings assigned to it by international rating agencies, as well as market-based indicators.
Sovereign bonds are assessed similarly, but with an emphasis on different fundamental factors, including the country’s economic
strength, institutional strength, financial strength of the government, political risks and other relevant factors.
After a loan is issued or a fixed income security is acquired, the customer’s financial position and the issuers’ risk indicators, such as
credit rating changes, are monitored on a regular basis in order to timely identify potential credit quality deterioration. The loan
monitoring process covers monitoring of financial results, financial position and cash flows of the borrower, loan repayment discipline
and assessment of collateral quality.
The Group reviews its loan portfolio and securities portfolio on a regular basis to assess its structure, quality and concentration levels,
as well as to evaluate portfolio trends and to control credit risk level. The Group takes measures for limiting credit risk concentration
by diversifying the portfolio and setting credit risk concentration limits. To limit its credit risk, the Group has set the following
concentration limits: individual counterparty and issuer limits, maximum exposure limit linked to a particular risk class of
counterparty/issuer, limit for internally risk weighted exposures in a particular country/sector combination, limit for groups of mutually
related customers, limit for large risk exposures, limit for transactions with the Group’s related parties, industry limit, limit by customer
type, loan product type, collateral type, intragroup transactions. Control of compliance with credit risk concentration limits, credit risk
identification, monitoring and reporting is the responsibility of the Risk Sector.
In addition to the credit risk, which is inherent in the Group’s loan portfolio and fixed income securities portfolio, the Group is also
exposed to credit risk as a result of its banking relationships with multiple credit institutions which it maintains in order to process
customer transactions in a prompt and efficient manner. The Group manages its exposure to commercial banks and brokerage
companies by monitoring on a regular basis the credit ratings of such institutions, conducting due diligence of their credit profiles and
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 61
monitoring the individual exposure limits applicable to counterparties set by the Financial Market and Counterparty Risk Committee
(FMCRC). The Group’s exposures to derivative counterparties arise from its activities in managing liquidity and credit risks through
short term derivatives that do not expose it to material counterparty risk.
Loan to value of loans to public
Estimated fair value of loan collateral is presented separately for those assets where collateral and other credit enhancements exceed
carrying value of the asset (LTV < 100%) and those assets where collateral and other credit enhancements are equal to or less than
the carrying value of the asset (LTV ≥ 100%).
Group, EUR thousands
31/12/2021
31/12/2020
LTV < 100%
LTV ≥ 100% and
unsecured
LTV < 100%
LTV ≥ 100% and
unsecured
Carrying
value of
assets
Estimated
fair value of
collateral
Carrying
value of
assets
Estimated
fair value of
collateral
Carrying
value of
assets
Estimated
fair value of
collateral
Carrying
value of
assets
Estimated
fair value of
collateral
Regular loans and
credit lines
1,359,310
3,245,902
238,794
49,592
1,002,584
2,177,093
248,113
89,905
Finance leases
343,779
552,683
639,085
465,446
193,985
338,448
654
625
Card lending
86
369
59,777
11
229
304
67,951
13,789
Factoring
-
-
53,120
-
14,432
14,629
2,970
2,959
Other loans
-
-
7,558
-
-
-
10,305
-
Total net loans to
public
1,703,175
3,798,954
998,334
515,049
1,211,230
2,530,474
329,993
107,278
Including Stage 3
classified exposures
43,244
179,787
12,039
8,388
14,141
36,158
5,787
3,406
Bank, EUR thousands
31/12/2021
31/12/2020
LTV < 100%
LTV ≥ 100% and
unsecured
LTV < 100%
LTV ≥ 100% and
unsecured
Carrying
value of
assets
Estimated
fair value of
collateral
Carrying
value of
assets
Estimated
fair value of
collateral
Carrying
value of
assets
Estimated
fair value of
collateral
Carrying
value of
assets
Estimated
fair value of
collateral
Regular loans and
credit lines
1,350,697
3,226,245
217,506
43,862
996,535
2,164,461
240,965
83,315
Card lending
86
369
59,777
11
229
304
67,951
13,789
Other loans
-
-
7,558
-
-
-
10,305
-
Loans to subsidiaries
1,003
1,155
973,086
-
-
-
202,328
1,206
Total net loans to
public
1,351,786
3,227,769
1,257,927
43,873
996,764
2,164,765
521,549
98,310
Including Stage 3
classified exposures
29,133
147,729
1,200
101
12,591
31,726
5,525
3,144
Collateral value is determined using both estimated fair value of the real estate and other pledged assets. Qualifying high quality
guarantees issued by state development or similar institutions are also included. Personal guarantees from households or unrated
non-financial enterprises are excluded. Mostly, loans falling into category “Regular loans and credit lines” are secured by collateral or
commercial pledges. In general, card loans are granted to clients on a basis of their cash flows’ assessment and no collateral is
required in most cases. Similarly, consumer lending products, which are presented as regular loans, are unsecured and granted based
on client’s credit assessment. For loans to the leasing subsidiaries of the Group, no formal tangible collateral is required. The
intragroup financing is used to originate finance leases to clients. Full compliance with lending guidelines of the Group are obeyed by
subsidiaries when originating leases to clients. Finance leases are secured by the respective property leased-out. Most factoring
balances are originated under recourse terms, many are insured with reputable third parties. Insurance coverage is not considered
an eligible collateral for the purposes of this disclosure.
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 62
Assets, liabilities and off-balance sheet items by geographical profile
Group as of 31/12/2021, EUR thousands
Latvia
Lithuania
Estonia
Other EU
countries
Other
countries
Total
Assets
Cash and cash balances at central banks
270,249
88,875
2,502
-
9,399
371,025
Loans to credit institutions
3,201
16
406
6,017
49,102
58,742
Debt securities
481,772
635,869
96,982
421,132
165,965
1,801,720
Loans to public
1,299,294
1,000,969
380,421
9,372
11,453
2,701,509
Equity instruments
124
-
-
79
1,076
1,279
Other financial instruments
25,759
-
-
15,811
462
42,032
Derivatives
4,182
15
-
106
-
4,303
Other assets
56,812
9,527
5,146
30
2,436
73,951
Total assets
2,141,393
1,735,271
485,457
452,547
239,893
5,054,561
Liabilities
Deposits from credit institutions and central
banks
477,065
-
-
2,153
17
479,235
Deposits and borrowings from customers
2,845,249
669,061
62,472
53,821
183,260
3,813,863
Debt securities issued
258,895
-
-
-
-
258,895
Derivatives
357
125
-
200
57
739
Other liabilities
76,081
12,177
12,463
32
4,001
104,754
Total liabilities
3,657,647
681,363
74,935
56,206
187,335
4,657,486
Off-balance sheet items
Contingent liabilities
7,498
25,747
637
121
262
34,265
Financial commitments
229,014
131,811
23,153
322
3,643
387,943
For additional information on geographical distribution of securities exposures please refer to Note 15 (Debt Securities). EUR 9.4
million of the Group's cash and deposit with central banks balances presented as "Other countries" is with Swiss National Bank
(2020: EUR 15.6 million). From the Group’s loans to credit institutions presented as "Other countries" EUR 20.0 million are with Swiss
credit institutions (2020: EUR 6.7 million) and EUR 23.6 million with United States registered credit institutions (2020: EUR 21.4
million). Investments in mutual funds are not analysed by their ultimate issuer and are classified as other financial instruments.
Group as of 31/12/2020, EUR thousands
Latvia
Lithuania
Estonia
Other EU
countries
Other
countries
Total
Assets
Cash and cash balances at central banks
1,049,958
48,214
32,837
-
15,597
1,146,606
Loans to credit institutions
2,702
-
-
16,681
31,904
51,287
Debt securities
420,977
601,713
68,507
485,620
183,373
1,760,190
Loans to public
875,681
493,598
149,436
8,876
13,632
1,541,223
Equity instruments
124
-
-
143
4,497
4,764
Other financial instruments
27,151
-
-
15,880
312
43,343
Derivatives
1,139
7
-
327
1
1,474
Other assets
37,200
7,716
2,854
36
625
48,431
Total assets
2,414,932
1,151,248
253,634
527,563
249,941
4,597,318
Liabilities
Deposits from credit institutions and central
banks
448,926
-
-
86
979
449,991
Deposits and borrowings from customers
2,596,230
558,796
58,769
238,025
219,570
3,671,390
Debt securities issued
60,080
-
-
-
-
60,080
Derivatives
3,002
8
-
1,441
10
4,461
Other liabilities
56,395
6,072
2,074
15
2,530
67,086
Total liabilities
3,164,633
564,876
60,843
239,567
223,089
4,253,008
Off-balance sheet items
Contingent liabilities
15,684
5,230
919
205
1,865
23,903
Financial commitments
177,199
78,293
4,809
136
613
261,050
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 63
Bank as of 31/12/2021, EUR thousands
Latvia
Lithuania
Estonia
Other EU
countries
Other
countries
Total
Assets
Cash and cash balances at central banks
270,249
88,875
2,502
-
-
361,626
Loans to credit institutions
-
-
-
6,578
29,115
35,693
Debt securities
470,922
626,137
94,838
335,844
124,567
1,652,308
Loans to public
1,829,828
584,948
181,119
9,097
4,721
2,609,713
Equity instruments
124
-
-
79
1,076
1,279
Other financial instruments
7,400
-
-
-
-
7,400
Derivatives
4,182
15
-
106
-
4,303
Other assets
101,248
9,314
3,191
1
13,820
127,574
Total assets
2,683,953
1,309,289
281,650
351,705
173,299
4,799,896
Liabilities
Deposits from credit institutions and central
banks
477,065
-
-
2,153
20,410
499,628
Deposits and borrowings from customers
2,834,407
669,457
61,133
15,602
84,925
3,665,524
Debt securities issued
258,895
-
-
-
-
258,895
Derivatives
357
125
-
200
57
739
Other liabilities
22,127
6,565
809
32
14
29,547
Total liabilities
3,592,851
676,147
61,942
17,987
105,406
4,454,333
Off-balance sheet items
Contingent liabilities
7,477
25,747
637
52
4,950
38,863
Financial commitments
266,091
138,314
26,229
322
109
431,065
For additional information on geographical distribution of securities exposures please refer to Note 15 (Debt Securities). From the
Bank’s loans to credit institutions presented as "Other countries" EUR 23.6 million with United States registered credit institutions
(2020: EUR 21.4 million).
Bank as of 31/12/2020, EUR thousands
Latvia
Lithuania
Estonia
Other EU
countries
Other
countries
Total
Assets
Cash and cash balances at central banks
1,049,957
48,214
32,837
-
-
1,131,008
Loans to credit institutions
-
-
-
15,070
25,219
40,289
Debt securities
410,603
591,670
66,850
375,827
118,725
1,563,675
Loans to public
870,136
488,202
144,289
8,775
6,911
1,518,313
Equity instruments
124
-
-
143
4,497
4,764
Other financial instruments
13,834
-
-
-
-
13,834
Derivatives
1,139
7
-
327
1
1,474
Other assets
60,535
9,582
3,125
7
13,840
87,089
Total assets
2,406,328
1,137,675
247,101
400,149
169,193
4,360,446
Liabilities
Deposits from credit institutions and central
banks
448,926
-
-
86
21,947
470,959
Deposits and borrowings from customers
2,586,803
558,818
58,209
173,238
101,028
3,478,096
Debt securities issued
60,080
-
-
-
-
60,080
Derivatives
3,002
8
-
1,441
10
4,461
Other liabilities
22,171
5,551
1,504
15
10
29,251
Total liabilities
3,120,982
564,377
59,713
174,780
122,995
4,042,847
Off-balance sheet items
Contingent liabilities
15,662
5,230
919
-
1,435
23,246
Financial commitments
182,061
85,821
7,854
136
217
276,089
Market risk
Market risk is the risk that the Group will incur a loss as a result of the mark-to-market revaluation of balance sheet and off-balance
sheet items caused by changes in market values of financial instruments due to changes in foreign exchange rates, interest rates and
other factors.
Position risk of financial instruments is assessed and limits are set by the Group’s Investment Committee (GIC). The decisions of the
GIC are approved by the Bank’s Management Board. Market risk is managed by the Group’s business units and subsidiaries which
can accept market risk in line with the set limits and investment restrictions of the respective portfolio. Market risk is measured,
monitored and risk levels are reported by the Risk Sector.
The Group manages market risk by developing investment guidelines for every significant portfolio, which restrict, among other things,
the sensitivity against interest rate changes, the duration and credit quality profile of investments, as well as by setting individual limits
for issuers and financial instruments, to keep limit volumes closely linked to the results of risk assessments. The Group places
significant emphasis on managing concentration risk and applies a framework under which limits are set on risk adjusted exposures
for every country and sector combination that the Group invests in. To assess position risk the Group uses sensitivity and scenario
analysis, which identifies and quantifies the negative impact of adverse events on the portfolio of the Group, taking into consideration
regional, sector profiles of the portfolio and credit rating risk profiles of issuers.
If market prices of the Groups investments in equities and mutual investment funds were to change by 5%, the net result of the Group
would change by EUR 0.9 million (2020: EUR 1.3 million) and securities fair value revaluation reserve by EUR 0.0 million (2020: EUR
0.0 million) and the net result of the Bank would change by EUR 0.4 million (2020: EUR 0.9 million) and securities fair value revaluation
reserve by EUR 0.0 million (2020: EUR 0.0 million).
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 64
Interest rate risk
Interest rate risk is related to the possible negative impact of changes in general interest rates on the Group’s income and economic
value.
Interest rate risk management in the Group is carried out in accordance with Interest Rate Risk Management Policy. Interest rate risk
is assessed and decisions are taken by the Assets and Liabilities Management Committee (ALCO). The decisions of the ALCO are
approved by the Bank’s Management Board. The ALCO sets the acceptable interest rate risk level and the Group’s internal limit
system, monitors the compliance with the approved limits and use of the instruments for the management of interest rate risk. Interest
rate risk measurement, management and reporting are responsibilities of the Treasury Sector, while the Risk Sector ensures proper
oversight and prepares analytical reports to the ALCO and the Bank’s Management Board.
The Group manages interest rate risk by using repricing gap analysis of the risk sensitive assets and liabilities, duration analysis of
assets and liabilities as well as stress testing. The Group sets limits for impact of interest rate shock on economic value, net interest
income and revaluation reserve. Based on the market analysis and the Group’s financing structure, the ALCO sets the interest rates
for customer deposits.
The following table represents the impact of a parallel change in yield curve by 100 basis points on the Group’s and the Bank’s profit
before tax (over 12-month period) and revaluation reserve in equity arising from securities accounted at fair value. Scenarios
incorporate zero floor interest rate if such a condition exists in the loan agreement. Customer deposit rates are assumed to be
constrained by a zero-lower bound. Group’s figures are estimated from entities that bear significant interest rate risk: AS Citadele
banka and Kaleido Privatbank AG.
31/12/2021, EUR thousands
Total for all currencies
EUR only
USD only
Profit / (loss)
before
taxation
Securities
fair value
revaluation
reserve
Profit / (loss)
before
taxation
Securities
fair value
revaluation
reserve
Profit / (loss)
before
taxation
Securities
fair value
revaluation
reserve
Bank
+100 basis points scenario
1,726
(8,219)
1,653
(6,360)
79
(1,425)
-100 basis points scenario
3,556
8,645
3,934
6,669
(384)
1,513
Group
+100 basis points scenario
5,119
(9,179)
5,093
(6,853)
21
(1,887)
-100 basis points scenario
4,082
9,629
4,548
7,176
(460)
1,987
31/12/2020, EUR thousands
Total for all currencies
EUR only
USD only
Profit / (loss)
before
taxation
Securities
fair value
revaluation
reserve
Profit / (loss)
before
taxation
Securities
fair value
revaluation
reserve
Profit / (loss)
before
taxation
Securities
fair value
revaluation
reserve
Bank
+100 basis points scenario
1,077
(7,152)
793
(6,107)
198
(1,039)
-100 basis points scenario
(62)
7,500
786
6,397
(558)
1,097
Group
+100 basis points scenario
522
(9,679)
n/a
n/a
n/a
n/a
-100 basis points scenario
492
10,027
n/a
n/a
n/a
n/a
Currency risk
Currency risk is a risk of loss arising from fluctuations in currency exchange rates.
Currency risk management in the Group is carried out in accordance with Currency Risk Management Policy. Currency risk is
assessed and decisions are made by the FMCRC. The decisions of the FMCRC are approved by the Bank’s Management Board.
The FMCRC defines the acceptable currency risk level and the Group’s internal limit system, as well as monitors compliance with
these limits.
Day-to-day currency risk management is the responsibility of the Treasury Sector, while risk monitoring and reporting is the
responsibility of the Risk Sector.
The Group has a low risk appetite for foreign exchange risk. The Group aims to keep exposures at levels that would produce a small
net impact even in periods of high volatility. Several well-known methodologies are used to measure and manage foreign exchange
risk including a conservative limit for a daily value-at-risk exposure. The Group is in full compliance with the currency position
requirements of Latvian legislation.
In the event of exchange rates for the following currencies in which the Group and the Bank has net open positions adversely change
as per scenario below, the potential total decrease in the Group’s and Bank’s total equity (ignoring any tax effect) would amount
approximately to the following:
Group, EUR thousands
31/12/2021
31/12/2020
Scenario:
USD
CHF
Other
currencies
USD
CHF
Other
currencies
2% adverse change
11
20
10
11
170
8
5% adverse change
28
51
24
27
425
20
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 65
Bank, EUR thousands
31/12/2021
31/12/2020
Scenario:
USD
CHF
Other
currencies
USD
CHF
Other
currencies
2% adverse change
1
1
1
11
1
-
5% adverse change
2
2
3
28
3
-
Assets, liabilities and off-balance sheet items by currency profile
Group as of 31/12/2021, EUR thousands
EUR
USD
CHF
GBP
Other
Total
Assets
Cash and cash balances at central banks
359,896
1,303
9,399
61
366
371,025
Loans to credit institutions
21,217
33,464
188
330
3,543
58,742
Debt securities
1,669,674
101,770
11,227
16,226
2,823
1,801,720
Loans to public
2,682,943
12,830
5,726
-
10
2,701,509
Equity instruments
203
1,076
-
-
-
1,279
Other financial instruments
33,719
7,899
-
414
-
42,032
Derivatives
4,303
-
-
-
-
4,303
Other assets
70,816
162
2,411
-
562
73,951
Total assets
4,842,771
158,504
28,951
17,031
7,304
5,054,561
Liabilities
Deposits from credit institutions and central
banks
475,815
115
-
46
3,259
479,235
Deposits and borrowings from customers
3,450,918
304,822
12,547
19,392
26,184
3,813,863
Debt securities issued
258,895
-
-
-
-
258,895
Derivatives
739
-
-
-
-
739
Other liabilities
100,736
25
3,991
-
2
104,754
Total liabilities
4,287,103
304,962
16,538
19,438
29,445
4,657,486
Equity
397,845
(752)
29
(33)
(14)
397,075
Total liabilities and equity
4,684,948
304,210
16,567
19,405
29,431
5,054,561
Net balance sheet position
157,823
(145,706)
12,384
(2,374)
(22,127)
-
Net off-balance sheet foreign exchange contracts
(155,050)
145,137
(11,370)
2,915
22,063
3,695
Net long/ (short) total position
2,773
(569)
1,014
541
(64)
3,695
Group as of 31/12/2020, EUR thousands
EUR
USD
CHF
GBP
Other
Total
Assets
Cash and cash balances at central banks
1,128,528
1,271
15,598
95
1,114
1,146,606
Loans to credit institutions
10,817
32,006
299
2,133
6,032
51,287
Debt securities
1,591,949
144,177
10,764
10,496
2,804
1,760,190
Loans to public
1,529,117
9,329
2,777
-
-
1,541,223
Equity instruments
267
4,497
-
-
-
4,764
Other financial instruments
35,762
7,258
-
323
-
43,343
Derivatives
1,474
-
-
-
-
1,474
Other assets
46,738
171
548
3
971
48,431
Total assets
4,344,652
198,709
29,986
13,050
10,921
4,597,318
Liabilities
Deposits from credit institutions and central
banks
439,591
940
-
-
9,460
449,991
Deposits and borrowings from customers
3,284,103
328,817
9,239
18,419
30,812
3,671,390
Debt securities issued
60,080
-
-
-
-
60,080
Derivatives
4,461
-
-
-
-
4,461
Other liabilities
64,637
47
2,398
-
4
67,086
Total liabilities
3,852,872
329,804
11,637
18,419
40,276
4,253,008
Equity
343,585
705
6
7
7
344,310
Total liabilities and equity
4,196,457
330,509
11,643
18,426
40,283
4,597,318
Net balance sheet position
148,195
(131,800)
18,343
(5,376)
(29,362)
-
Net off-balance sheet foreign exchange contracts
(159,507)
131,252
(9,849)
5,780
29,361
(2,963)
Net long/ (short) total position
(11,312)
(548)
8,494
404
(1)
(2,963)
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 66
Bank as of 31/12/2021, EUR thousands
EUR
USD
CHF
GBP
Other
Total
Assets
Cash and cash balances at central banks
359,896
1,303
-
61
366
361,626
Loans to credit institutions
5,694
28,332
81
67
1,519
35,693
Debt securities
1,566,334
68,968
-
14,322
2,684
1,652,308
Loans to public
2,596,929
12,784
-
-
-
2,609,713
Equity instruments
203
1,076
-
-
-
1,279
Other financial instruments
7,400
-
-
-
-
7,400
Derivatives
4,303
-
-
-
-
4,303
Other assets
113,099
109
13,805
-
561
127,574
Total assets
4,653,858
112,572
13,886
14,450
5,130
4,799,896
Liabilities
Deposits from credit institutions and central
banks
477,354
18,805
2
48
3,419
499,628
Deposits and borrowings from customers
3,382,385
239,379
2,553
17,342
23,865
3,665,524
Debt securities issued
258,895
-
-
-
-
258,895
Derivatives
739
-
-
-
-
739
Other liabilities
29,504
40
-
-
3
29,547
Total liabilities
4,148,877
258,224
2,555
17,390
27,287
4,454,333
Equity
346,170
(557)
-
(35)
(15)
345,563
Total liabilities and equity
4,495,047
257,667
2,555
17,355
27,272
4,799,896
Net balance sheet position
158,811
(145,095)
11,331
(2,905)
(22,142)
-
Net off-balance sheet foreign exchange contracts
(155,050)
145,137
(11,370)
2,915
22,063
3,695
Net long/ (short) total position
3,761
42
(39)
10
(79)
3,695
Bank as of 31/12/2020, EUR thousands
EUR
USD
CHF
GBP
Other
Total
Assets
Cash and cash balances at central banks
1,128,528
1,271
-
95
1,114
1,131,008
Loans to credit institutions
4,972
28,815
19
1,913
4,570
40,289
Debt securities
1,466,675
86,511
-
7,946
2,543
1,563,675
Loans to public
1,508,984
9,329
-
-
-
1,518,313
Equity instruments
267
4,497
-
-
-
4,764
Other financial instruments
13,834
-
-
-
-
13,834
Derivatives
1,474
-
-
-
-
1,474
Other assets
72,211
105
13,805
1
967
87,089
Total assets
4,196,945
130,528
13,824
9,955
9,194
4,360,446
Liabilities
Deposits from credit institutions and central
banks
440,554
19,745
687
3
9,970
470,959
Deposits and borrowings from customers
3,189,404
241,040
3,354
15,721
28,577
3,478,096
Debt securities issued
60,080
-
-
-
-
60,080
Derivatives
4,461
-
-
-
-
4,461
Other liabilities
29,201
46
-
1
3
29,251
Total liabilities
3,723,700
260,831
4,041
15,725
38,550
4,042,847
Equity
317,190
399
-
3
7
317,599
Total liabilities and equity
4,040,890
261,230
4,041
15,728
38,557
4,360,446
Net balance sheet position
156,055
(130,702)
9,783
(5,773)
(29,363)
-
Net off-balance sheet foreign exchange contracts
(159,507)
131,252
(9,849)
5,780
29,361
(2,963)
Net long/ (short) total position
(3,452)
550
(66)
7
(2)
(2,963)
The investment in the Group’s Swiss subsidiary Kaleido Privatbank AG, which is carried at cost, is shown as a CHF exposure, as the
recoverability of this asset will ultimately depend on the Swiss currency’s performance.
Liquidity risk
Liquidity risk is the risk that the Group will be unable to meet its legal payment obligations. The purpose of liquidity risk management
is to ensure the availability of liquid assets to cover any possible gaps between cash inflows and outflows as well as to secure sufficient
funding for lending and investment activities.
The Group manages its liquidity risk in accordance with Liquidity Risk Management Policy. The management and reporting of liquidity
risk is coordinated by the Treasury Sector, and the risk is assessed and decisions are taken by the ALCO. The decisions of the ALCO
are approved by the Bank’s Management Board. The Risk Sector on a monthly basis provides information to the ALCO and the Bank’s
Management Board about the level of the assumed risk as part of the reporting and supervision process.
Liquidity risk for the Group is assessed in each currency in which the Group has performed a significant amount of transactions.
Liquidity risk limits are reviewed at least once a year and also when there are major changes to the Group’s operations or external
factors affecting its operations. A liquidity crisis management plan has been developed and is updated on a regular basis.
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 67
One of the crucial tools used to evaluate liquidity risk is scenario analysis. Several scenarios of different severity and duration are
employed by the Group with risk tolerances defined for the outcomes of those scenarios. Furthermore, the Group has developed a
system of liquidity risk limits and early warning indicators and systematically prepares cash flow forecasts which incorporate
assumptions about the most likely flow of funds over the period of one year. For general assessment of existing gaps between
contractual maturities of assets and liabilities without any assumptions on customer behaviour, the Group regularly analyses liquidity
term structure and sets corresponding risk tolerances.
The Group’s balance sheet structure is planned for at least a one-year period and is aligned with development plans for the current
period. The major current and potential funding sources are regularly analysed and controlled across the Group. The Group maintains
regular contact with its interbank business partners and creditors with the aim of projecting possible deadlines for repayment or
prolongation of funding sources as well as absorption of excess liquidity.
Liquidity coverage ratio
The general principles of the liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR) as measurements of the Bank’s
and the Group’s liquidity position are defined in the Regulation (EC) No 575/2013. The Commission Delegated Regulation (EU)
2015/61 defines general LCR calculation principles in more details. The minimum LCR requirement is 100% and it represents the
amount of liquidity available to cover calculated net future liquidity outflows. The Bank and the Group is compliant with LCR
requirements.
EUR thousands
31/12/2021
31/12/2020
31/12/2021
31/12/2020
Group
Group
Bank
Bank
1.
Liquidity buffer
1,255,477
2,061,640
1,190,783
1,985,199
2.
Net liquidity outflow
635,011
578,923
727,528
573,097
3.
Liquidity coverage ratio
198%
356%
164%
346%
Assets, liabilities and off-balance sheet items by contractual maturity
Group as of 31/12/2021, EUR thousands
Within 1
month
2-3
months
4-6
months
7-12
months
2-5
years
Over 5
years and
undated
Total
Assets
Cash and cash balances at central banks
331,083
-
-
-
-
39,942
371,025
Loans to credit institutions
36,759
21,983
-
-
-
-
58,742
Debt securities
22,052
143,055
29,816
83,809
1,095,724
427,264
1,801,720
Loans to public
94,118
131,991
142,953
300,034
1,395,216
637,197
2,701,509
Equity instruments
-
-
-
-
-
1,279
1,279
Other financial instruments
-
-
-
-
-
42,032
42,032
Derivatives
735
2,026
6
1,536
-
-
4,303
Other assets
26,268
514
211
1,979
2,741
42,238
73,951
Total assets
511,015
299,569
172,986
387,358
2,493,681
1,189,952
5,054,561
Liabilities
Deposits from credit institutions and central
banks
3,425
-
-
-
475,810
-
479,235
Deposits and borrowings from customers
3,535,407
58,558
30,108
128,875
51,452
9,463
3,813,863
Debt securities issued
-
-
-
-
-
258,895
258,895
Derivatives
477
207
55
-
-
-
739
Lease liabilities
258
506
737
1,461
4,652
-
7,614
Other liabilities
19,933
2,705
2,524
5,855
37,089
29,034
97,140
Total liabilities
3,559,500
61,976
33,424
136,191
569,003
297,392
4,657,486
Equity
-
-
-
-
-
397,075
397,075
Total liabilities and equity
3,559,500
61,976
33,424
136,191
569,003
694,467
5,054,561
Net balance sheet position – long/ (short)
(3,048,485)
237,593
139,562
251,167
1,924,678
495,485
-
Off-balance sheet items
Contingent liabilities
34,265
-
-
-
-
-
34,265
Financial commitments
387,943
-
-
-
-
-
387,943
Liabilities and commitments are allocated to the earliest period in which the Group may be contractually required to settle the liabilities
or the customer may draw down undrawn loan commitments. Issued financial guarantee contracts are allocated to the earliest period
in which the guarantee could be called. Assets are allocated to the earliest period in which the Group may contractually require to
settle receivables.
Financial liabilities by contractual undiscounted cash flows
Group as of 31/12/2021, EUR thousands
Within 1
month
2-3
months
4-6
months
7-12
months
Over 1
year
Total
Carrying
amount
Financial liabilities designated at fair value
through profit or loss
402
6,691
3,072
6,443
23,150
39,758
39,745
Financial liabilities measured at amortised
cost*
3,538,752
52,418
29,226
128,677
810,574
4,559,647
4,519,862
Off-balance sheet items
Contingent liabilities
34,265
-
-
-
-
34,265
34,265
Financial commitments
387,943
-
-
-
-
387,943
387,943
* Includes Deposits from credit institutions and central banks, part of Deposits and borrowings from customers, Debt securities issued and Lease liabilities.
Undiscounted contractual cash flows for other liabilities equal their carrying value.
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 68
Assets, liabilities and off-balance sheet items by contractual maturity
Group as of 31/12/2020, EUR thousands
Within 1
month
2-3
months
4-6
months
7-12
months
2-5
years
Over 5
years and
undated
Total
Assets
Cash and cash balances at central banks
1,108,796
-
-
-
-
37,810
1,146,606
Loans to credit institutions
31,016
20,271
-
-
-
-
51,287
Debt securities
26,919
73,616
53,455
60,067
1,189,189
356,944
1,760,190
Loans to public
54,860
70,781
81,397
161,186
684,006
488,993
1,541,223
Equity instruments
-
-
-
-
-
4,764
4,764
Other financial instruments
-
-
-
-
-
43,343
43,343
Derivatives
820
639
-
15
-
-
1,474
Other assets
13,101
197
194
241
1,258
33,440
48,431
Total assets
1,235,512
165,504
135,046
221,509
1,874,453
965,294
4,597,318
Liabilities
Deposits from credit institutions and central
banks
11,158
-
-
-
438,833
-
449,991
Deposits and borrowings from customers
3,116,129
130,020
53,559
255,437
105,619
10,626
3,671,390
Debt securities issued
-
-
-
-
-
60,080
60,080
Derivatives
3,101
1,263
96
1
-
-
4,461
Lease liabilities
102
587
880
1,587
5,613
-
8,769
Other liabilities
7,934
1,770
1,558
2,757
23,427
20,871
58,317
Total liabilities
3,138,424
133,640
56,093
259,782
573,492
91,577
4,253,008
Equity
-
-
-
-
-
344,310
344,310
Total liabilities and equity
3,138,424
133,640
56,093
259,782
573,492
435,887
4,597,318
Net balance sheet position – long/ (short)
(1,902,912)
31,864
78,953
(38,273)
1,300,961
529,407
-
Off-balance sheet items
Contingent liabilities
23,903
-
-
-
-
-
23,903
Financial commitments
261,050
-
-
-
-
-
261,050
Financial liabilities by contractual undiscounted cash flows
Group as of 31/12/2020, EUR thousands
Within 1
month
2-3
months
4-6
months
7-12
months
Over 1
year
Total
Carrying
amount
Financial liabilities designated at fair value
through profit or loss
277
1,232
3,374
4,583
26,557
36,023
36,010
Financial liabilities measured at amortised
cost*
3,127,198
129,463
52,614
257,981
607,371
4,174,627
4,154,220
Off-balance sheet items
Contingent liabilities
23,903
-
-
-
-
23,903
23,903
Financial commitments
261,050
-
-
-
-
261,050
261,050
* Includes Deposits from credit institutions and central banks, part of Deposits and borrowings from customers, Debt securities issued and Lease liabilities.
Undiscounted contractual cash flows for other liabilities equal their carrying value.
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 69
Assets, liabilities and off-balance sheet items by contractual maturity
Bank as of 31/12/2021, EUR thousands
Within 1
month
2-3
months
4-6
months
7-12
months
2-5
years
Over 5
years and
undated
Total
Assets
Cash and cash balances at central banks
321,684
-
-
-
-
39,942
361,626
Loans to credit institutions
13,710
21,983
-
-
-
-
35,693
Debt securities
22,052
139,791
25,086
76,242
980,477
408,660
1,652,308
Loans to public
36,941
1,019,053
64,226
155,930
722,177
611,386
2,609,713
Equity instruments
-
-
-
-
-
1,279
1,279
Other financial instruments
-
-
-
-
-
7,400
7,400
Derivatives
735
2,026
6
1,536
-
-
4,303
Other assets
21,452
1
1
17
5
106,098
127,574
Total assets
416,574
1,182,854
89,319
233,725
1,702,659
1,174,765
4,799,896
Liabilities
Deposits from credit institutions and central
banks
14,919
1,943
6,956
-
475,810
-
499,628
Deposits and borrowings from customers
3,424,234
51,867
27,036
122,432
36,521
3,434
3,665,524
Debt securities issued
-
-
-
-
-
258,895
258,895
Derivatives
477
207
55
-
-
-
739
Lease liabilities
258
506
737
1,461
3,567
-
6,529
Other liabilities
2,218
-
-
-
-
20,800
23,018
Total liabilities
3,442,106
54,523
34,784
123,893
515,898
283,129
4,454,333
Equity
-
-
-
-
-
345,563
345,563
Total liabilities and equity
3,442,106
54,523
34,784
123,893
515,898
628,692
4,799,896
Net balance sheet position – long/ (short)
(3,025,532)
1,128,331
54,535
109,832
1,186,761
546,073
-
Off-balance sheet items
Contingent liabilities
38,863
-
-
-
-
-
38,863
Financial commitments
431,065
-
-
-
-
-
431,065
Liabilities and commitments are allocated to the earliest period in which the Group may be contractually required to settle the liabilities
or the customer may draw down undrawn loan commitments. Issued financial guarantee contracts are allocated to the earliest period
in which the guarantee could be called. Assets are allocated to the earliest period in which the Group may contractually require to
settle receivables.
Financial liabilities by contractual undiscounted cash flows
Bank as of 31/12/2021, EUR thousands
Within 1
month
2-3
months
4-6
months
7-12
months
Over 1
year
Total
Carrying
amount
Financial liabilities measured at amortised
cost*
3,439,447
54,325
36,097
128,506
811,986
4,470,361
4,430,576
Off-balance sheet items
Contingent liabilities
38,863
-
-
-
-
38,863
38,863
Financial commitments
431,065
-
-
-
-
431,065
431,065
* Includes Deposits from credit institutions and central banks, Deposits and borrowings from customers, Debt securities issued and Lease liabilities.
Undiscounted contractual cash flows for other liabilities equal their carrying value.
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 70
Assets, liabilities and off-balance sheet items by contractual maturity
Bank as of 31/12/2020, EUR thousands (Reclassified)
Within 1
month
2-3
months
4-6
months
7-12
months
2-5
years
Over 5
years and
undated
Total
Assets
Cash and cash balances at central banks
1,093,198
-
-
-
-
37,810
1,131,008
Loans to credit institutions
20,018
20,271
-
-
-
-
40,289
Debt securities
22,766
64,493
45,927
42,729
1,061,310
326,450
1,563,675
Loans to public
37,230
247,553
63,252
129,063
552,637
488,578
1,518,313
Equity instruments
-
-
-
-
-
4,764
4,764
Other financial instruments
-
-
-
-
-
13,834
13,834
Derivatives
820
639
-
15
-
-
1,474
Other assets
12,217
-
1
6
2
74,863
87,089
Total assets
1,186,249
332,956
109,180
171,813
1,613,949
946,299
4,360,446
Liabilities
Deposits from credit institutions and central
banks
19,993
4,564
2,268
-
444,134
-
470,959
Deposits and borrowings from customers
2,968,489
124,224
47,918
250,857
81,248
5,360
3,478,096
Debt securities issued
-
-
-
-
-
60,080
60,080
Derivatives
3,101
1,263
96
1
-
-
4,461
Lease liabilities
84
551
826
1,599
5,639
-
8,699
Other liabilities
4,050
-
-
-
-
16,502
20,552
Total liabilities
2,995,717
130,602
51,108
252,457
531,021
81,942
4,042,847
Equity
-
-
-
-
-
317,599
317,599
Total liabilities and equity
2,995,717
130,602
51,108
252,457
531,021
399,541
4,360,446
Net balance sheet position – long/ (short)
(1,809,468)
202,354
58,072
(80,644)
1,082,928
546,758
-
Off-balance sheet items
Contingent liabilities
23,246
-
-
-
-
-
23,246
Financial commitments
276,089
-
-
-
-
-
276,089
Financial liabilities by contractual undiscounted cash flows
Bank as of 31/12/2020, EUR thousands
Within 1
month
2-3
months
4-6
months
7-12
months
Over 1
year
Total
Carrying
amount
Financial liabilities measured at amortised
cost*
2,988,652
129,427
52,560
254,968
612,632
4,038,239
4,017,834
Off-balance sheet items
Contingent liabilities
23,246
-
-
-
-
23,246
23,246
Financial commitments
276,089
-
-
-
-
276,089
276,089
* Includes Deposits from credit institutions and central banks, Deposits and borrowings from customers, Debt securities issued and Lease liabilities.
Undiscounted contractual cash flows for other liabilities equal their carrying value.
Change in lease liabilities
EUR thousands
2021
2020
2021
2020
Group
Group
Bank
Bank
Opening balance
8,769
8,699
8,699
10,702
New lease liabilities recognised
7,240
8,901
5,899
8,901
Amortisation of existing lease liabilities and
derecognition
(8,395)
(8,831)
(8,069)
(10,904)
Implied interest expense calculated
64
41
50
94
Settlement of implied interest expense
(64)
(41)
(50)
(94)
Closing balance
7,614
8,769
6,529
8,699
Derivative liabilities settled on a net basis and contractual undiscounted cash flows arising from derivatives settled on a gross basis
Group as of 31/12/2021, EUR thousands
Within 1
month
2-3
months
4-6
months
7-12
months
2-5
years
Over
5 years
Total
Derivatives settled on a net basis
Foreign exchange derivatives
(86)
(66)
2
-
-
-
(150)
Derivatives settled on a gross basis
Foreign exchange derivatives:
Outflow
(38,959)
(127,753)
(1,433)
(47,133)
-
-
(215,278)
Inflow
39,303
129,651
1,380
48,770
-
-
219,104
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 71
Group as of 31/12/2020, EUR thousands
Within 1
month
2-3
months
4-6
months
7-12
months
2-5
years
Over
5 years
Total
Derivatives settled on a net basis
Foreign exchange derivatives
(958)
(76)
-
9
-
-
(1,025)
Derivatives settled on a gross basis
Foreign exchange derivatives:
Outflow
(73,462)
(74,500)
(3,130)
(1,641)
(81)
-
(152,814)
Inflow
72,142
73,959
3,037
1,644
81
-
150,863
Bank as of 31/12/2021, EUR thousands
Within 1
month
2-3
months
4-6
months
7-12
months
2-5
years
Over
5 years
Total
Derivatives settled on a net basis
Foreign exchange derivatives
(86)
(66)
2
-
-
-
(150)
Derivatives settled on a gross basis
Foreign exchange derivatives:
Outflow
(38,959)
(127,753)
(1,433)
(47,133)
-
-
(215,278)
Inflow
39,303
129,651
1,380
48,770
-
-
219,104
Bank as of 31/12/2020, EUR thousands
Within 1
month
2-3
months
4-6
months
7-12
months
2-5
years
Over
5 years
Total
Derivatives settled on a net basis
Foreign exchange derivatives
(958)
(76)
-
9
-
-
(1,025)
Derivatives settled on a gross basis
Foreign exchange derivatives:
Outflow
(73,462)
(74,500)
(3,130)
(1,641)
(81)
-
(152,814)
Inflow
72,142
73,959
3,037
1,644
81
-
150,863
Comparison of contractual undiscounted cash flows and carrying amount of derivatives
EUR thousands
31/12/2021
31/12/2020
31/12/2021
31/12/2020
Group
Group
Bank
Bank
Contractual undiscounted cash flows of derivatives
3,676
(2,976)
3,676
(2,976)
Carrying value of derivatives, net
3,564
(2,987)
3,564
(2,987)
Anti-money laundering, counter terrorism financing, counter proliferation financing and sanctions
compliance policy
The Group has adopted Money Laundering (ML)/Terrorism and Proliferation Financing (TF/PF) Risk Management Strategy, Anti-
Money Laundering and Counter Terrorism and Proliferation Financing Policy and Sanctions compliance Policy to have an effective
and comprehensive anti-money laundering (AML) and combating terrorist un proliferation financing (CTF/CPF) internal control system
and to ensure compliance with sanctions imposed by international organizations and national authorities. The Group regularly reviews
its AML/CTF/CPF and sanctions compliance policies and procedures with an aim to strengthen them and to update in line with changes
in external regulatory requirements and international best practice. Internal control system of AML/CTF/CPF and Sanctions
compliance of the Group is regularly reviewed by independent external and internal experts to ensure that the Group complies with
applicable AML/CTF/CPF and Sanctions compliance requirements. The experts where appropriate provide recommendations on how
to strengthen and improve AML/CTF/CPF and Sanctions compliance internal control systems. The recommendations are diligently
evaluated and implemented.
The Group performs ML/TF/PF and Sanctions Risk Assessment on a regular basis to evaluate ML/TF/PF and Sanctions compliance
risk of the Group. The assessment among others includes identification and assessment of the inherent ML/TF/PF and Sanctions
compliance risk and effectiveness assessment of the existing AML/CTF/CPF and Sanctions compliance controls.
The Group has a dedicated Group’s Chief Compliance Officer (Member of the Management Board responsible for compliance), Money
Laundering Reporting Officer, Sanctions Officer and a special team with a duty of overseeing the Group policies, procedures and
processes implemented to preventing money laundering, terrorist and proliferation financing and sanctions violations.
Know Your Customer, including customer risk scoring, customer due diligence, customer enhanced due diligence practices, on-going
customer transactions monitoring, effective international and national sanctions screening is the priority of the Group. A sound risk
culture across the Group and risk aware employees, besides implemented industry’s best practice processes and systems, is the
backbone of ML/TF/PF risk management. Each employee of the Group has a good knowledge of customers and their business
partners and has a full understanding of the substance of transactions, thus is able to timely detect suspicious customer activity. Under
the Sanctions compliance policy, it is strictly forbidden to knowingly and intentionally participate in activities whose purpose or effect
is to evade the restrictions imposed by the sanctions, thus preventing the Group from been used to circumvent the sanctions. The
Group enforces sanctions established by the United Nations Security Council, the European Union against specific countries and
persons, national sanctions and the Office of Foreign Assets Control (OFAC) of the US Department of the Treasury. The Group
complies with OFAC sanctions in USD and all other currencies.
The Group has established AML/CTF/CPF and Sanctions compliance training program for all its employees. The training program
consists of three parts: initial, regular and extraordinary employee training and is tailored to the necessary knowledge level of each
function. For employees directly responsible for AML/CTF/CPF and Sanctions compliance, special advanced trainings, workshops
and conferences are arranged to enhance their knowledge and skills necessary for their tasks. The Group supports and requires
international certification in the AML/CTF/CPF and Sanctions compliance fields for at least the leading specialists involved in the
ML/TF/PF risk management function (e.g. CAMS or ICA-certification).
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 72
Capital management
Capital adequacy is calculated in accordance with the current global standards of the bank capital adequacy (the Basel III international
regulatory framework) as implemented by the European Union via a regulation (EU) 575/2013 and a directive 2013/36/EU, the
Financial and Capital Markets Commission’s (FCMC) rules and other relevant regulations.
Capital adequacy is a measure of sufficiency of the Group’s eligible capital resources to cover credit risks, market risks, operational
risk and other specific risks arising predominantly from asset and off-balance sheet exposures of the Group. The regulations require
credit institutions to maintain a Total Capital adequacy ratio of 8.0% of the total risk weighted exposure amounts. The rules also
require 4.5% minimum Common Equity Tier 1 capital ratio and 6.0% minimum Tier 1 capital ratio.
Total SREP capital requirement (TSCR) requires capital to cover risks in addition to these covered by the regulation (EU) 575/2013.
TSCR is established in a supervisory review and evaluation process (SREP) carried out by the supervisory authority. The supervisory
authority determines TSCR on a risk-by-risk basis, using supervisory judgement, the outcome of supervisory benchmarking, ICAAP
calculations and other relevant inputs. The additional pillar 2 capital requirement is re-assessed annually by the supervisory authority.
As of the period end based on the FCMC’s assessment an additional 2.30% capital requirement (TSCR) for the Group and the Bank
is determined to cover pillar 2 risks. As of the period end the Bank and the Group is required to cover 56.25% of the TSCR with
Common Equity Tier 1 capital (1.29% capital requirement), 75% with Tier 1 capital (1.73% capital requirement) and 100% with Total
Capital (2.30% capital requirement). From 1 March 2022 an updated pillar 2 capital requirement of 2.5% applies.
On top of the minimum capital adequacy ratios and the pillar 2 capital requirements (TSCR), the Group and the Bank must comply
with the capital buffer requirements. The buffer requirements must be reached by Common Equity Tier 1 capital. The capital
conservation buffer both for the Group and the Bank is set at 2.50%, limiting dividend pay-out and certain other Tier 1 equity instrument
buybacks, if the buffer threshold is not exceeded.
Citadele, being identified as “other systemically important institution” (O-SII), must also comply with the O-SII capital buffer requirement
set by the FCMC at 1.50%.
Countercyclical capital buffer norms at each balance sheet date are calculated based on the actual risk exposure geographical
distribution and the countercyclical buffer rates applicable for each geographical location. In reaction to the Covid-19 events most
European countercyclical capital buffer requirements were decreased to 0%. Therefore, based on the regional distribution of the
Group’s exposures the effective countercyclical capital buffer requirement of the Group has decreased to almost 0%.
The Group and the Bank applies requirements of minimum loss coverage for non-performing exposures in line with FCMC regulations
for the exposures originated until 25 April 2019, and in line with a regulation (EU) 2019/630 for exposures originated starting from 26
April 2019. The minimum loss coverage calculation is mathematically simplistic “calendar based” calculation for non-performing
exposures, which is constructed on the principle - the longer an exposure has been non-performing, the lower the probability for the
recovery of its value. Therefore, the portion of the exposure that should be covered by provisions, impairments, other adjustments or
deductions should increase with time, following a pre-defined calendar. Insufficient coverage for non-performing exposures is
deductible from the regulatory capital. Due to the Group’s provisioning policy and portfolio structure, the regulation of minimum loss
coverage for non-performing exposures has had minor impact on the Group’s capital adequacy position.
The Bank has to comply with the regulatory requirements both at the Bank’s standalone level and at the Group’s consolidated level.
As of the period end both the Bank and the Group have sufficient capital to comply with the FCMC’s capital adequacy requirements.
The long-term regulatory capital position of the Group and the Bank is planned and managed in line with these and other expected
upcoming regulatory requirements.
Regulatory capital requirements of the Group on 31 December 2021
Common
equity Tier 1
capital ratio
Tier 1
capital ratio
Total capital
adequacy
ratio
Common equity Tier 1 ratio
4.50%
4.50%
4.50%
Additional Tier 1 ratio
-
1.50%
1.50%
Additional total capital ratio
-
-
2.00%
Individual TSCR, as determined by
the FCMC (pillar 2 capital
requirement)
1.29%
1.73%
2.30%
Capital buffer requirements:
Capital conservation buffer
2.50%
2.50%
2.50%
O-SII capital buffer
1.50%
1.50%
1.50%
Countercyclical capital buffer
0.00%
0.00%
0.00%
Capital requirement
9.79%
11.73%
14.30%
As of the period end capital and capital buffer requirements for the Bank and the Group are the same.
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 73
Capital adequacy ratio (including net result for the period)
EUR thousands
31/12/2021
31/12/2020
31/12/2021
31/12/2020
Group
Group
Bank
Bank
Common equity Tier 1 capital
Paid up capital instruments and share premium
157,127
156,556
157,127
156,556
Retained earnings
230,786
176,651
186,548
156,574
Regulatory deductions
(8,255)
(5,599)
(6,290)
(5,187)
Other capital components and transitional adjustments, net
9,634
13,405
5,173
8,746
Tier 2 capital
Eligible part of subordinated liabilities
60,000
60,000
60,000
60,000
Total own funds
449,292
401,013
402,558
376,689
Risk weighted exposure amounts for credit risk, counterparty
credit risk and dilution risk
2,164,268
1,340,639
2,174,244
1,303,818
Total exposure amounts for position, foreign currency open
position and commodities risk
10,916
13,690
10,916
4,747
Total exposure amounts for operational risk
206,624
187,358
162,314
146,960
Total exposure amounts for credit valuation adjustment
4,592
933
4,592
933
Total risk exposure amount
2,386,400
1,542,620
2,352,066
1,456,458
Total capital adequacy ratio
18.8%
26.0%
17.1%
25.9%
Common equity Tier 1 capital ratio
16.3%
22.1%
14.6%
21.7%
The consolidated Group for regulatory purposes is different from the consolidated Group for accounting purposes. As per regulatory
requirements AAS CBL Life, a licensed insurer, is not included in the consolidated Group for capital adequacy purposes.
Consequently, it is excluded from own funds calculation and individual assets of AAS CBL Life are not included as risk exposures in
the Group’s capital adequacy calculation. Instead, the carrying value of the Group’s investment in AAS CBL Life constitutes a risk
exposure in the Group’s capital adequacy ratio calculation.
Transitional adjustments applied as of 31 December 2021
Capital adequacy calculation in accordance with the EU and the FCMC regulations permits transitional adjustments. The regulatory
compliance is measured based on the transitional capital adequacy ratio. For transparency purposes the fully loaded capital adequacy
ratio (i.e., excluding transitional adjustments) is also disclosed. The expectation is that in the medium term the transitional capital
adequacy ratio will converge with the fully loaded capital adequacy ratio, as the transitional provisions expire.
Most of the transitional provisions, if applied, allow for a favourable treatment of specific capital components or risk exposure items,
resulting in a marginal improvement in the capital adequacy ratios. Application of the transitional provisions is mostly discretionary.
An application decision is evaluated in the context of estimated positive impact on the capital adequacy ratio versus the resources
required to develop the systems and the processes to implement each transitional provision.
The transitional provisions that the Group and the Bank has applied for the period end capital adequacy calculations:
The regulation (EU) 2017/2395 which permits specific proportion of the IFRS 9 implementation impact to be amortised over a five-
year period (starting from 2018) for capital adequacy calculation purposes.
All other transitional provisions for which the Group and the Bank is eligible are not applied as of the period end and are still in the
assessment phase, implementation phase or have been decided not to be implemented.
Fully loaded capital adequacy ratio (i.e., excluding transitional adjustments, including net result for the period)
EUR thousands
31/12/2021
31/12/2020
31/12/2021
31/12/2020
Group
Group
Bank
Bank
Common equity Tier 1 capital, fully loaded
386,366
336,917
339,503
312,412
Tier 2 capital
60,000
60,000
60,000
60,000
Total own funds, fully loaded
446,366
396,917
399,503
372,412
Total risk exposure amount, fully loaded
2,383,981
1,539,013
2,349,379
1,452,523
Total capital adequacy ratio, fully loaded
18.7%
25.8%
17.0%
25.6%
Common equity Tier 1 capital ratio, fully loaded
16.2%
21.9%
14.5%
21.5%
Leverage ratio – fully loaded and transitional (including net result for the period)
Leverage ratio is calculated as Tier 1 capital versus the total exposure measure. The minimum requirement is 3%. The exposure
measure includes both non-risk based on-balance sheet and off-balance sheet items calculated in accordance with the capital
requirements regulation. The leverage ratio and the risk-based capital adequacy ratio requirements are complementary, with the
leverage ratio defining the minimum capital to total exposure requirement and the risk-based capital adequacy ratios limiting bank
risk-taking.
31/12/2021
31/12/2020
31/12/2021
31/12/2020
Group
Group
Bank
Bank
Leverage Ratio – fully phased-in definition of Tier 1 capital
7.5%
7.3%
6.9%
7.1%
Leverage Ratio – transitional definition of Tier 1 capital
7.6%
7.4%
6.9%
7.1%
Minimum requirement for own funds and eligible liabilities (MREL) under BRRD
The European Commission has adopted the regulatory technical standards (RTS) on the criteria for determining the minimum
requirement for own funds and eligible liabilities (MREL) under the Banking Package (CRR2/CRD5/BRRD2/SRMR2). In order to
ensure the effectiveness of bail-in and other resolution tools introduced by BRRD 2, it requires that all institutions must meet an
individual MREL requirement. The MREL requirement for each institution is comprised of several elements, including the required
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 74
loss absorbing capacity of the institution, and the level of recapitalisation needed to implement the preferred resolution strategy
identified during the resolution planning process. Items eligible for inclusion in MREL include institution's own funds (within the
meaning of the capital requirements directive), along with eligible liabilities subject to conditions set in regulation 2019/876.
As a part of the new Banking Package in 2020 the SRB published an updated MREL policy, effective from 2021. It requires MREL to
be calculated based on both total risk exposure amount (TREA) and leverage ratio exposure (LRE) amount. Statutory subordination
requirements will be set depending on the Group’s classification and will be communicated individually in a MREL decision.
SRB has determined the consolidated intermediate MREL target for Citadele Group at the level of 18.03% of TREA or 5.26% of LRE,
whichever is higher, to be met by 1 January 2022 and the final calibrated MREL target to be met by 1 January 2024 at the level of
19.96% of TREA or 5.26% of LRE, whichever is higher. After the transition period the Group shall comply with MREL at all times on
the basis of evolving amounts of TREA/LRE. As of 1 January 2022, the Group is in compliance with both TREA and LRE based MREL
requirements.
The MREL targets effective as of period end were determined by the SRB using the financial and supervisory information as of 31
December 2019 and is expected to be updated by the SRB annually based on more recent financial information of the Group.
Operational risk
The Group has adopted the Basel Committee on Banking Supervision’s definition of operational risk: the probability of incurring losses
due to failure or partial failure of internal processes to comply with the requirements of the laws and binding external regulations, as
well as the requirements of internal regulations, due to the acts of the Group’s employees and operation of systems, irregularities in
internal processes, as well as due to the acts of third parties or other external conditions.
Further operational risk is divided into the following categories: personnel risk, process risk, IT and system risk, external risk.
Operational risk is managed using an integrated and comprehensive framework of policies, methodologies, procedures and
regulations for identification, analysis, mitigation, control, and reporting of operational risk. The Group’s operational risk management
processes are integral to all business activities and are applicable to all employees and members of the Group. The Group’s aim is to
ensure that each of its employees knows not just how to perform specific transactions, but also understand the key areas where risk
can arise and the processes and steps required to prevent, or otherwise mitigate such risk.
The goal of the Group’s operational risk management framework is to maintain the lowest possible level of risk while ensuring that
any remaining risk is economically justified in light of the need to sustain the Group’s performance and profit in the long term. Whether
a risk is economically justified depends on an assessment of the potential losses it could cause, the probability of its occurrence, the
ability to implement mitigating measures and the cost of such measures, as well as the level of risk that would remain if such mitigating
measures were to be put in place.
The Group aims to avoid operational risks with a potential impact which exceeds 1 bp of CET1 capital and has a higher probability of
occurrence than once per five years, or risks with unquantifiable impact which are unmanageable, irrespective of the financial gains
this could bring. Each accepted risk must be economically justified and, in cases where the assessment of operational risk in monetary
terms is possible, the costs of the control measures required must be commensurate with the eventual loss that could be prevented
by the existence of the control system.
Due to Covid-19 situation previously unseen measures have been undertaken by governments in the jurisdictions the Group operates.
Citadele has worked tirelessly to implement the necessary operational and other measures to facilitate smooth and uninterrupted
high-quality client services and to organise productive and safe work environment for its employees. As a result, operational risks are
at levels comparable to pre Covid-19 levels with no substantial increase in risk events.
The Group applies following approaches for operational risk management:
▪ Assessing operational risk in development projects: new and updated services and products are introduced only after a
thorough risk assessment has been carried out;
▪ Conducting regular operational risk-control self-assessment: the Group identifies and assesses potential operational risk
events, assesses control systems which are in place, and analyses the necessary risk reduction measures;
▪ Measuring operational risk indicators: the Group uses statistical, financial, and other indicators which represent the levels of
operational risk in its various activities;
▪ Measuring, analysing, monitoring, reporting and escalating operational risk: the Group registers and analyses operational risk
events, including their severity, causes and other important information in an operational risk loss and incident database;
▪ Conducting scenario and sensitivity analysis and stress-testing;
▪ Performing business continuity planning: the Group performs regular business impact analysis and has implemented a
Disaster Recovery Plan;
▪ Assigning responsibilities: the operational risk management system includes assignment of responsibilities to certain
individuals; and
▪ Documenting decisions: the Group maintains records in relation to the process undertaken to reach a particular decision or to
prevent or mitigate a particular risk.
Operational risk management in the Group is carried out in accordance with Operational Risk Management Policy.
AS Citadele banka
Financial statements | Notes
AS Citadele banka Annual report for the year ended 31 December 2021 75
NOTE 34. EVENTS AFTER THE REPORTING DATE
Citadele has agreed to sell its Swiss subsidiary
In January 2022, AS Citadele banka has entered into a binding agreement with Trusted Novus Bank Limited regarding the sale of its
Swiss subsidiary – Kaleido Privatbank AG. Trusted Novus Bank Limited will acquire 100% of Kaleido Privatbank AG. The closing of
the acquisition is expected by year end 2022, subject to regulatory approvals.
The sale of Kaleido Privatbank AG is a further step focusing on Citadele’s core activities in the Baltics and is in line with Citadele’s
long-term ambition to become the leading financial services provider in the Baltics.
Recent events in Ukraine and Russian sanctions
The new laws, policies and sanctions, including sanctions imposed on Russia, are diligently implemented. Consistently with long
standing Citadele’s objective to become the leading financial services provider in the Baltics, internal risk exposure limits with Russia,
other CIS countries and Ukraine have been low. As of signing of these financial statements the carrying amount of exposures to credit
institutions and companies domiciled in Russia or Ukraine is less than EUR 1.1 million. Carrying value of the Group’s investments in
collective investment funds with direct exposure to eastern Europe is around EUR 4 million. Of these funds, direct exposures to the
above countries are only a part of the overall investment funds’ holdings. Based on the management’s assessment, as of signing
these financial statements, the Bank and the Group has not experienced a material direct impact from the recent events in Ukraine or
from Russian sanctions. The indirect impact from these events is monitored, as Citadele’s clients and global markets adjust to the
new economic realities.
.
.
AUDITORS REPORT
AS Citadele banka
Other regulatory disclosures
AS Citadele banka Annual report for the year ended 31 December 2021 86
OTHER REGULATORY DISCLOSURES
Besides financial, corporate governance and other disclosures included in this interim report of AS Citadele banka, the Financial and
Capital Market Commission’s regulation No. 231 "Regulation on Preparation of Public Quarterly Reports of Credit institutions" requires
several additional disclosures which are presented in this note.
Income Statement, regulatory format
EUR thousands
12m 2021
12m 2020
12m 2021
12m 2020
Group
Group
Bank
Bank
1.
Interest income
123,974
90,124
93,458
81,144
2.
Interest expense
(15,890)
(22,584)
(14,994)
(22,484)
3.
Dividend income
37
42
37
42
4.
Commission and fee income
60,655
51,761
49,720
43,445
5.
Commission and fee expense
(24,198)
(21,580)
(23,397)
(20,745)
6.
Gain or loss on derecognition of financial assets and
liabilities not measured at fair value through profit or loss,
net
526
1,334
412
1,234
7.
Gain or loss on financial assets and liabilities measured at
fair value through profit or loss, net
443
(25,033)
381
(25,572)
8.
Fair value change in the hedge accounting
-
-
-
-
9.
Gain or loss from foreign exchange trading and revaluation of
open positions
7,282
6,076
6,821
6,587
10.
Gain or loss on derecognition of non-financial assets, net
-
-
-
-
11.
Other income
7,606
19,154
4,816
3,629
12.
Other expense
(4,227)
(4,061)
(3,076)
(3,108)
13.
Administrative expense
(86,264)
(71,945)
(64,660)
(61,681)
14.
Amortisation and depreciation charge *
(10,351)
(8,044)
(7,616)
(7,688)
15.
Gain or loss on modifications in financial asset contractual
cash flows
(932)
160
(932)
160
16.
Provisions, net
(1,721)
1,937
(1,747)
1,973
17.
Impairment charge and reversals, net
(90)
(12,394)
(9,054)
(547)
18.
Negative goodwill recognised in profit or loss
-
-
-
-
19.
Share of the profit or loss of investments in subsidiaries, joint
ventures and associates accounted for using the equity
method
5
(726)
5
(726)
20.
Profit or loss from non-current assets and disposal groups
classified as held for sale
(213)
(307)
(213)
(307)
21.
Profit before taxation
56,642
3,914
29,961
(4,644)
22.
Corporate income tax
(1,597)
(306)
(318)
(117)
23.
Net profit / loss for the period
55,045
3,608
29,643
(4,761)
24.
Other comprehensive income for the period
(3,372)
(765)
(2,770)
(697)
* Group’s amortisation and depreciation charges for 2021 include EUR 1,578 thousand of depreciation of assets under operating
lease contracts. Operating lease of assets is core business of the Group, thus these expenses are part of operating income.
Balance Sheet, regulatory format
EUR thousands
31/12/2021
31/12/2020
31/12/2021
31/12/2020
Group
Group
Bank
Bank
1.
Cash and demand balances with central banks
371,025
1,146,606
361,626
1,131,008
2.
Demand deposits due from credit institutions
36,743
31,018
13,710
20,020
3.
Financial assets designated at fair value through profit or loss
47,410
49,314
12,778
19,805
3.1.
Including loans to public and credit institutions
-
-
-
-
4.
Financial assets at fair value through other comprehensive
income
340,905
377,240
233,370
224,976
5.
Financial assets at amortised cost
4,184,527
2,944,709
4,050,838
2,877,548
5.1.
Including loans to public and credit institutions
2,723,508
1,561,492
2,631,696
1,538,582
6.
Derivatives – hedge accounting
-
-
-
-
7.
Change in the fair value of the portfolio hedged against
interest rate risk
-
-
-
-
8.
Investments in subsidiaries, joint ventures and associates
279
274
77,087
46,756
9.
Tangible assets
20,444
12,930
11,496
14,143
10.
Intangible assets
8,562
5,981
6,083
5,832
11.
Tax assets
4,603
3,272
3,050
3,057
12.
Other assets
39,117
25,028
28,912
16,355
13.
Non-current assets and disposal groups classified as held for
sale
946
946
946
946
14.
Total assets (1.+....+13.)
5,054,561
4,597,318
4,799,896
4,360,446
15.
Due to central banks
475,816
438,838
475,816
438,838
16.
Demand liabilities to credit institutions
3,419
1,069
11,664
2,824
17.
Financial liabilities designated at fair value through profit or
loss
40,485
40,471
739
4,461
17.1
Including deposits from customers and credit institutions
39,745
36,010
-
-
18.
Financial liabilities measured at amortised cost
4,033,012
3,705,544
3,936,567
3,567,473
18.1
Including deposits from customers and credit institutions
3,774,117
3,645,464
3,677,672
3,507,393
19.
Derivatives – hedge accounting
-
-
-
-
20.
Change in the fair value of the portfolio hedged against
interest rate risk
-
-
-
-
21.
Provisions
3,934
2,211
3,882
2,133
22.
Tax liabilities
573
677
189
115
23.
Other liabilities
100,247
64,198
25,476
27,003
24.
Liabilities included in disposal groups classified as held for
sale
-
-
-
-
25.
Total liabilities (15.+...+24.)
4,657,486
4,253,008
4,454,333
4,042,847
AS Citadele banka
Other regulatory disclosures
AS Citadele banka Annual report for the year ended 31 December 2021 87
26.
Shareholders’ equity
397,075
344,310
345,563
317,599
27.
Total liabilities and shareholders’ equity (25.+26.)
5,054,561
4,597,318
4,799,896
4,360,446
28.
Memorandum items
422,208
284,953
469,928
299,335
29.
Contingent liabilities
34,265
23,903
38,863
23,246
30.
Financial commitments
387,943
261,050
431,065
276,089
ROE and ROA ratios
12m 2021
12m 2020
12m 2021
12m 2020
Group
Group
Bank
Bank
Return on equity (ROE) (%)
14.85%
1.05%
8.94%
(1.49%)
Return on assets (ROA) (%)
1.14%
0.09%
0.65%
(0.12%)
Average value is calculated as the arithmetic mean of the balance sheet assets or residual capital and reserves at the beginning of the reporting period
and at the end of the reporting period.
Capital adequacy ratio
EUR thousands
31/12/2021
31/12/2020
31/12/2021
31/12/2020
Group
Group
Bank
Bank
1
Own funds (1.1.+1.2.)
449,292
401,013
402,558
376,689
1.1
Tier 1 capital (1.1.1.+1.1.2.)
489,292
341,013
342,558
316,689
1.1.1
Common equity Tier 1 capital
489,292
341,013
342,558
316,689
1.1.2
Additional Tier 1 capital
-
-
-
-
1.2
Tier 2 capital
60,000
60,000
60,000
60,000
2
Total risk exposure amount
(2.1.+2.2.+2.3.+2.4.+2.5.+2.6.+2.7.)
2,386,400
1,542,620
2,352,066
1,456,458
2.1
Risk weighted exposure amounts for credit, counterparty credit
and dilution risks and free deliveries
2,164,268
1,340,639
2,174,244
1,303,818
2.2
Total risk exposure amount for settlement/delivery
-
-
-
-
2.3
Total risk exposure amount for position, foreign exchange and
commodities risks
10,916
13,690
10,916
4,747
2.4
Total risk exposure amount for operational risk
206,624
187,358
162,314
146,960
2.5
Total risk exposure amount for credit valuation adjustment
4,592
933
4,592
933
2.6
Total risk exposure amount related to large exposures in the
trading book
-
-
-
-
2.7
Other risk exposure amounts
-
-
-
-
3
Capital adequacy ratios
3.1
Common equity Tier 1 capital ratio (1.1.1./2.*100)
16.3%
22.1%
14.6%
21.7%
3.2
Surplus (+)/ deficit (-) of Common equity Tier 1 capital (1.1.1.-
2.*4.5%)
281,904
271,595
236,715
251,148
3.3
Tier 1 capital ratio (1.1./2.*100)
16.3%
22.1%
14.6%
21.7%
3.4
Surplus (+)/ Deficit (-) of Tier 1 capital (1.1.-2.*6%)
246,108
248,456
201,434
229,302
3.5
Total capital ratio (1./2.*100)
18.8%
26.0%
17.1%
25.9%
3.6
Surplus (+)/ Deficit (-) of total capital (1.-2.*8%)
258,380
277,604
214,393
260,172
4
Combined buffer requirements (4.1.+4.2.+4.3.+4.4.+4.5.)
95,456
61,705
94,083
58,258
4.1
Capital conservation buffer
59,660
38,566
58,802
36,411
4.2
Conservation buffer for macroprudential or systemic risk at
member state’s level
-
-
-
-
4.3
Institution specific countercyclical buffer
-
-
-
-
4.4
Systemic risk buffer
-
-
-
-
4.5
Other systemically important institution buffer
35,796
23,139
35,281
21,847
5
Capital adequacy ratios, including adjustments
5.1
Impairment or asset value adjustments for capital adequacy
ratio purposes
-
-
-
-
5.2
Common equity tier 1 capital ratio including line 5.1
adjustments
16.3%
22.1%
14.6%
21.7%
5.3
Tier 1 capital ratio including line 5.1 adjustments
16.3%
22.1%
14.6%
21.7%
5.4
Total capital ratio including line 5.1 adjustments
18.8%
26.0%
17.1%
25.9%
Capital adequacy ratios here are calculated in accordance with the Basel III regulation as implemented via EU regulation 575/2013, directive 2013/36/EU
and relevant FCMC regulations. In the disclosure above, in the Group’s and the Bank’s regulatory capital, audited profits and any losses accumulated
up to the reporting date are included.
EUR thousands
31/12/2021
31/12/2020
31/12/2021
31/12/2020
Group
Group
Bank
Bank
1.A
Own funds, IFRS 9 transitional provisions not applied
446,366
396,917
399,503
372,412
1.1.A
Tier 1 capital, IFRS 9 transitional provisions not applied
386,366
336,917
339,503
312,412
1.1.1.
A
Common equity Tier 1 capital, IFRS 9 transitional
provisions not applied
386,366
336,917
339,503
312,412
2.A
Total risk exposure amount, IFRS 9 transitional provisions
not applied
2,383,981
1,539,013
2,349,379
1,452,523
3.1.A
Common equity Tier 1 capital ratio, IFRS 9 transitional
provisions not applied
16.2%
21.9%
14.5%
21.5%
3.3.A
Tier 1 capital ratio, IFRS 9 transitional provisions not applied
16.2%
21.9%
14.5%
21.5%
3.5.A
Total capital ratio, IFRS 9 transitional provisions not applied
18.7%
25.8%
17.0%
25.6%
AS Citadele banka
Other regulatory disclosures
AS Citadele banka Annual report for the year ended 31 December 2021 88
Business Strategy and Objectives
Information about Citadele’s strategy and objectives is available in the “Values and strategy” section of the Bank’s web page.
Branches
AS Citadele banka has 19 branches and client service centres in Latvia, 1 branch in Estonia and 1 branch in Lithuania as of the period end. AS Citadele
banka has 4 client consultation centres in Latvia. The Lithuanian branch has 6 customer service units in Lithuania. Information about branches, client
service centres and ATMs of Citadele is available in the Citadele web page's section “Branches and ATMs”.
Bank’s Organizational Structure
Supervisory Board
Chief Executive Officer (MB)
Internal Audit
Chief Corporate Commercial
Officer (MB)
Corporate Business
Transaction Banking
Loan Recovery
Baltic Leasing
Corporate Financial Markets
Corporate Internal Risk Control
Chief Retail Commercial
Officer (MB)
Sky Branch
Retail Branch Network
Sales Support
Wealth Management
Chief Technology &
Operations Officer (MB)
IT Technology
IT Security
Project Management
Data Architecture & Delivery
Operations
Chief Risk
Officer (MB)
Risk management
Chief Strategy
Officer (MB)
Business Development
Data Science & AI
Digital Ventures
Chief Compliance
Officer (MB)
Compliance
Chief Financial
Officer (MB)
Finance
Financial Institutions
Legal
Financial markets
Treasury
MB Secretariat
Human Resources
Marketing & Communications
Transformation Office
Investors Relations
AS Citadele banka
Quarterly Financials of the Group
AS Citadele banka Annual report for the year ended 31 December 2021 89
QUARTERLY STATEMENTS OF INCOME AND BALANCE SHEETS OF THE GROUP
Group, EUR thousands
Q4 2021
Q3 2021
Q2 2021
Q1 2021
Q4 2020
Interest income
31,714
31,598
30,653
30,009
21,892
Interest expense
(4,499)
(3,967)
(3,470)
(3,954)
(5,152)
Net interest income
27,215
27,631
27,183
26,055
16,740
Fee and commission income
16,598
15,896
14,709
13,452
13,529
Fee and commission expense
(6,985)
(5,955)
(5,956)
(5,302)
(5,851)
Net fee and commission income
9,613
9,941
8,753
8,150
7,678
Net financial income
503
2,138
2,293
2,385
5,301
Net other income / (expense)
(318)
191
1,874
96
15,336
Operating income
37,013
39,901
40,103
36,686
45,055
Staff costs
(15,347)
(15,001)
(15,895)
(14,868)
(13,009)
Other operating expenses
(8,354)
(6,032)
(5,558)
(5,209)
(5,333)
Depreciation and amortisation
(1,014)
(2,606)
(2,630)
(2,523)
(2,021)
Operating expense
(24,715)
(23,639)
(24,083)
(22,600)
(20,363)
Profit before impairment
12,298
16,262
16,020
14,086
24,692
Net credit losses
(1,608)
(3,775)
6,878
(3,108)
300
Other impairment losses
(56)
(35)
(89)
(18)
(448)
Operating profit before non-current assets held
for sale
10,634
12,452
22,809
10,960
24,544
Result from non-current assets held for sale
(60)
(51)
(46)
(56)
(243)
Operating profit
10,574
12,401
22,763
10,904
24,301
Income tax
(268)
(250)
(648)
(431)
(194)
Net profit
10,306
12,151
22,115
10,473
24,107
Group, EUR thousands
31/12/2021
30/09/2021
30/06/2021
31/03/2021
31/12/2020
Assets
Cash and cash balances at central banks
371,025
370,806
486,072
306,060
1,146,606
Loans to credit institutions
58,742
78,725
60,020
79,184
51,287
Debt securities
1,801,720
1,729,212
1,684,213
1,702,676
1,760,190
Loans to public
2,701,509
2,602,470
2,456,803
2,473,663
1,541,223
Equity instruments
1,279
1,302
1,311
1,281
4,764
Other financial instruments
42,032
41,653
39,633
43,587
43,343
Derivatives
4,303
4,657
3,889
5,094
1,474
Investments in related entities
279
274
274
274
274
Tangible assets
20,444
22,643
23,770
24,686
12,930
Intangible assets
8,562
8,501
8,212
7,474
5,981
Tax assets
4,603
5,537
5,340
4,216
3,272
Non-current assets held for sale
946
946
946
946
946
Other assets
39,117
52,263
35,447
41,324
25,028
Total assets
5,054,561
4,918,989
4,805,930
4,690,465
4,597,318
Liabilities
Deposits from credit institutions and central banks
479,235
477,492
478,047
440,384
449,991
Deposits and borrowings from customers
3,813,863
3,893,309
3,797,982
3,737,707
3,671,390
Debt securities issued
258,895
61,000
60,088
60,981
60,080
Derivatives
739
1,476
1,120
1,392
4,461
Provisions
3,934
2,763
1,757
2,221
2,211
Tax liabilities
573
659
806
681
677
Other liabilities
100,247
94,631
90,860
93,953
64,198
Total liabilities
4,657,486
4,531,330
4,430,660
4,337,319
4,253,008
Equity
Share capital
156,888
156,888
156,556
156,556
156,556
Reserves and other capital components
7,320
8,260
8,354
8,627
10,265
Retained earnings
232,867
222,511
210,360
187,963
177,489
Total equity
397,075
387,659
375,270
353,146
344,310
Total liabilities and equity
5,054,561
4,918,989
4,805,930
4,690,465
4,597,318
Off-balance sheet items
Guarantees and letters of credit
34,265
44,596
46,144
47,658
23,903
Financial commitments
387,943
297,747
267,409
267,395
261,050
AS Citadele banka
Definitions and abbreviations
AS Citadele banka Annual report for the year ended 31 December 2021 90
DEFINITIONS AND ABBREVIATIONS
ALCO – Assets and Liabilities Management Committee.
AML – anti-money laundering.
BRRD – the bank recovery and resolution directive.
CIR – cost to income ratio. "Operating expense" divided by “Operating income”.
COR – cost of risk ratio. “Net credit losses” divided by the average of gross loans at the beginning and the end of the period.
CTF – combating terrorist financing.
ECB - European Central Bank.
EU – the European Union.
FCMC – Financial and Capital Markets Commission.
FMCRC – Financial Market and Counterparty Risk Committee.
GIC – Group’s Investment Committee.
IAS – International accounting standards.
ICAAP – internal capital adequacy assessment process.
IFRS – International financial reporting standards.
LCR – liquidity coverage ratio.
Loan-to-deposit ratio. Carrying value of “Loans to public” divided by “Deposits and borrowings from customers” at the end of the
relevant period.
ML/TF – money laundering and terrorism financing.
MREL – minimum requirement for own funds and eligible liabilities.
NSFR – net stable funding ratio.
OFAC – Office of Foreign Assets Control of the US Department of the Treasury.
O-SII – other systemically important institution.
ROA – return on average assets. Annualised net profit for the relevant period divided by the average of opening and closing balances
for the period.
ROE – return on average equity. Annualised net profit for the relevant period divided by the average of opening and closing total
equity for the period.
RTS – regulatory technical standards.
SRB – the Single Resolution Board.
SREP – supervisory review and evaluation process.
Stage 1 financial instruments – exposures without significant increase in credit risk since initial recognition.
Stage 2 financial instruments – exposures with significant increase in credit risk since initial recognition but not credit-impaired.
Stage 3 financial instruments – Credit-impaired exposures.
Stage 3 impairment ratio – impairment allowance for stage 3 exposures divided by gross loans to public classified as stage 3.
Stage 3 loans to public ratio – stage 3 loans to public divided by total loans to public as of the end of the relevant period.
TLOF – total liabilities and own funds.
TLTRO – ECB's targeted longer-term refinancing operations
TSCR – SREP capital requirement.